No safety net: Insurance starts to go away

Ever since the words "insurance premium" began appearing on contracts in the Republic of Venice in 1255, modern global trade and now our broader society depend on insurance to mitigate risk of loss to enterprises and individuals for their business and personal property.

But as insurers retreat from areas made too risky for them by wildfires, hurricanes and floods supercharged by climate change, it becomes difficult to build new dwellings or continue operating businesses in disaster-prone areas.

A recent report complied by Deep Sky, a carbon removal company, illustrates just how bad things are getting in California. The key findings:

• Home insurance premiums have shot up 42% in the most fire prone areas of California [since 2009].


• One in five homes in extreme fire risk areas of California has lost coverage since 2019.


• Spring fire risk in the US Southwest and Northern Mexico has reached a ten-year record.

Trade war vise grip: China is squeezing rare earth supply and it's hurting

China is proving to be a more difficult adversary in the trade war launched by the Trump administration than previously imagined as it squeezes the world's rare earth elements (REEs) supply. I warned in early March that China had critical non-tariff weapons to bring to bear and that using them might turn out to be very painful for a world dependent on China's rare earth metal production. China currently controls 69 percent of the REEs mine production and almost 90 percent of the processing of these elements.

Why is this important? As I pointed out in my previous piece:

REEs are a group of metals, often found in deposits together, that are critical for modern electronics (such as computer hard disks, smartphones, and cameras); strong magnets used in hybrid cars and wind turbines; X-ray and MRI scanning equipment; aircraft engines; and crude oil refining. This is just a partial list. There are no viable substitutes for these metals available at any scale that would be meaningful.

When the Trump administration imposed tariffs on Chinese goods that reached 145 percent, the Chinese responded with their own tariffs on American goods of 125 percent. Those have since been dropped considerably to 30 percent for Chinese imports into the United States and 10 percent for American goods coming into China.

Taking a break - no post this week

I am taking a break this week and plan to post again on Sunday, June 8.