Daily Update: September 14, 2021

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Twenty years after the tragic events of 9/11, the global insurance industry is still determining how best to handle unprecedented risks both significant and small in a landscape punctuated with complex situations.

"That day still lives with me—every minute,” David Priebe, chairman of the Marsh & McLennan Cos. Inc.-owned reinsurance broker Guy Carpenter, told S&P Global Market Intelligence. The executive, who was preparing for meetings in the World Trade Center's South Tower when the first plane hit the North Tower, said he remembers the reverberation and seeing "shrapnel, debris, smoke streaming across the windows.”

“We’re now here in this COVID world, and I think that experience helped position us to be as effective as we are today,” he said.

"It is a good moment to reflect on those risks which are underwritten, but are not actually modeled,” Gordon Woo, a catastrophist at the risk-modeling firm RMS who created the company's terrorism risk model after the attacks, told S&P Global Market Intelligence. "That is a key takeaway on this 20^th  anniversary."

Sept. 11, 2001 transformed the insurance and reinsurance market, affecting multiple lines of business that generated the biggest-ever man-made loss (totaling $47 billion in 2019 dollars, according to the Insurance Information Institute), spurring the creation of several government-backed terrorism insurance schemes worldwide, and spotlighting industry weaknesses, strengths, and changes that are visible even today, according to S&P Global Market Intelligence.

The 20^th anniversary of the terrorist attacks came during a period of prolonged disruption due to the continuing coronavirus crisis, worsening climate-related disasters, and new black swan events.

The COVID-19 crisis has highlighted health coverage inequality, contributed to higher homeowner premiums, enhanced insurers’ earnings performance in many areas worldwide and weakened their profitability in others, and created conditions for an uptick of mergers and acquisitions across the industry.

Even as the race to net-zero heats up, many insurers still remain exposed to fossil fuel-dependent industries on both sides of the balance sheet—with investments facing climate risk on the asset side and underwriting risk, especially in the property and casualty line, on the liability side, according to S&P Global Sustainable1.

Compounding extreme weather and climate-related events are also reshaping the insurance landscape. In the U.S. alone, National Oceanic and Atmospheric Administration data shows that 2020 had 22 extreme weather and climate-related disasters, each with losses greater than $1 billion. More recently, wildfires in the West have become more damaging and intense with every blaze while property and casualty insurance capacity for wildfires shrinks, prompting insurers to turn to technology to find ways to keep such losses under control. Losses from last month’s Hurricane Ida could reach $25 billion.

Black swan events—spanning devastating cyber-attacks to disruptions involving container ships—are proliferating across global markets and reshaping the insurance industries within them.

In response to more threats and attacks, cyber liability insurance premiums grew by 28.6% last year, to $1.62 billion, according to an S&P Global Market Intelligence analysis.

Meanwhile, marine insurance specialists told S&P Global Market Intelligence that it could take years to get a grip on the enormity of claims that arise from container ship incidents, like the recent surge in containers that were lost overboard in the North Pacific region late last year and early this year, the grounding of the Ever Given in the Suez Canal in March, and a fire that destroyed the X-Press Pearl off the coast of Sri Lanka in June.   

Today is Tuesday, September 14, 2021, and here is today’s essential intelligence.

Uncertainty in the Global Economy

Economic Research: U.S. Real-Time Data: The Economy Hits A Speed Bump

Real-time data suggests that U.S. economic activity has hit a speed bump as total COVID-19 cases continue to climb higher amid bottlenecks across the supply chain. Fortunately, the rate of new infections has slowed in September. The silver lining may be that some people formerly reluctant about getting vaccinated have decided to get vaccinated, either because of worries about the new variant or because of new vaccination requirements for certain activities. In the U.S., the pace of COVID-19 vaccinations doubled—to an average of about 1 million doses per day last week, compared with a low point of 500,000 per day in late July.

—Read the full report from S&P Global Ratings

Better Pay, Conditions Prompt Americans To Quit Jobs At Near-Record Numbers

In July, nearly 3.98 million workers quit their jobs, up 25% from the 3.18 million who quit in July 2020 and up about 90% from the 2.1 million who quit in April 2020, at the height of the pandemic, according to the latest U.S. Bureau of Labor Statistics data. The figure is just behind the all-time high of 3.99 million resignations in April 2021.

—Read the full article from S&P Global Market Intelligence

The Credit Cycle

U.S. Structured Finance Snapshot: The Health Of U.S. Consumers

Snapshot of the health of U.S. consumers, including current macroeconomic conditions, perspectives on consumer leverage, the U.S. housing market, and ratings trends in consumer ABS, RMBS, and non-agency multifamily CMBS.

—Read the full report from S&P Global Ratings

SF Credit Brief: U.S. CMBS Delinquency Rate Fell To 4.7% In August

U.S. CMBS overall delinquency rate decreased 39 bps month-over-month to 4.7% in August. Seriously delinquent loans (60-plus-days delinquent) remained high at 88.5% of delinquencies. By balance, delinquency rates decreased for multifamily (161 bps), lodging (80 bps), and retail (21 bps), while industrial and office increased 1 bps each.

—Read the full report from S&P Global Ratings

Market Dynamics

Headwinds On The Active Horizon

Active managers’ performance was disappointing in 2020, despite the market’s heightened volatility. As the market continues to march upward in 2021, it’s natural to wonder if current conditions are favorable for stock pickers. S&P Global Dow Jones Indices expects active managers’ difficulties to persist.

—Read the full article from S&P Dow Jones Indices

FACTBOX: UK Electricity Prices Now Most Expensive In Europe

UK day-ahead power prices tripled to record levels Sept. 13 as tight generation margins combined with soaring power import, natural gas and carbon prices. The UK's accelerated coal phase-out along with reduced nuclear availability and low wind generation have exposed the market to rising gas prices. The following is a breakdown of the major issues being tracked by S&P Global Platts.

—Read the full article from S&P Global Platts

Banking Industry Under Pressure

Spanish Banks Face Uncertainty On Asset Quality, Despite No Q2 Deterioration

Spain's largest banks remain cautious about future problem loans even though they defied expectations regarding asset quality in the second quarter, according to analysts. The country's four biggest lenders by assets still had a total of €18.82 billion worth of loans under moratoriums as of June 30, according to calculations by S&P Global Market Intelligence.

—Read the full article from S&P Global Market Intelligence

Nordea Set To Lift Strategic Goals To Compete With Best-In-Class Nordic Banks

Rebounding from disappointing results just two years ago, Nordea Bank Abp is now on course to hit its profitability and cost-efficiency targets for 2022 and is ready to compete with large Nordic peers on those measures, according to analysts.

—Read the full article from S&P Global Market Intelligence

Technology & Media

Listen: The Essential Podcast, Episode 43: Silicon Valley is Not Normal — What Innovation Looks Like in the Real World

Dan Breznitz, Co-Director of the Innovation Policy Lab and Munk Chair of Innovation Studies at the University of Toronto, joins the Essential Podcast for a wide-ranging discussion on what innovation is and what it isn’t, how regions end up chasing the false model of Silicon Valley, and how innovation can be threatened by financialization and intellectual property rights.

—Listen and subscribe to the Essential Podcast from S&P Global

Global Internet Outages Drop 14% In Early September

Global internet outages totaled 220 in the week of Sept. 4, down 14% from 256 in the previous week, according to data from ThousandEyes, a network-monitoring service owned by Cisco Systems Inc. This is the second consecutive weekly decrease in the number of internet disruptions globally, with the figures close to levels recorded in early April.

—Read the full article from S&P Global Market Intelligence

ESG in the Time of COVID-19

The Path To Net-Zero Emissions: Credit Perspectives On What This Means For Some U.S. Regulated Electric Utilities

There are many components on the path to net-zero that have to work well in order for some utilities to achieve their goals, beginning with articulating a clear resource strategy that is beneficial for ratepayers. Closing down coal-fired generation is a logical next step toward net-zero for some vertically integrated utilities. The growth in renewable power generation is likely to remain a key aspect of the net-zero strategy for these utilities.

—Read the full report from S&P Global Ratings

Green Bonds Growing As A Share Of REIT Debt Issuance

Green bond offerings represent an increasing share of U.S. real estate investment trusts' debt capital raises as property owners move to earmark proceeds to environmentally sustainable projects.

—Read the full article from S&P Global Market Intelligence

Last-Minute Bill Advances That Would Prevent Illinois Nuclear Plant Closures, Cut Emissions

After heated debate in the Illinois House of Representatives, a bill was passed late Sept. 9 that would provide support to three nuclear power plants, phase down greenhouse gas emissions from two coal-fired plants and move the state toward 100% clean energy by 2050.

—Read the full article from S&P Global Platts

U.S. Climate Envoy Kerry Offers India Help To Meet 450 GW Renewables Target

U.S. Special Presidential Envoy for Climate John Kerry offered technological and financial support for India's renewables sector, which is eyeing a goal of 450 GW by 2030, at a Sept. 13 meeting with Environment, Forest and Climate Change Minister Bhupender Yadav.

—Read the full article from S&P Global Platts

UK Calls For Global 2050 Net-Zero Shipping Emissions Target

The UK has called for zero emissions from the global shipping fleet by 2050 but achieving this ambitious target will require industry and policymaker action and probably market-based measures (MBMs), a marine finance executive said Sept. 13.

—Read the full article from S&P Global Platts

The Future of Energy & Commodities 

Listen: Platts Analytics Sizes Up Global Oil Demand Outlook, Climate Policies Into 2022

Chris Midgley, global director of analytics at S&P Global Platts, shares his latest outlook for global oil demand heading into the third year of the pandemic and takes stock of the tension between climate ambitions and economic growth.

—Listen and subscribe to Capitol Crude, a podcast from S&P Global Platts

OPEC Now Predicts 2022 Return To Pre-Pandemic Oil Demand, In Bullish Case For Output Hikes

OPEC is more bullish on the global economic recovery for next year, projecting world oil demand to exceed pre-pandemic levels in 2022, while the bloc and its allies plan to continue gradually raising crude output.

—Read the full article from S&P Global Platts

U.S. CFTC Dwindles Further As Berkovitz Plans October Departure

The U.S. Commodity Futures Trading Commission member Dan Berkovitz said he will step down Oct. 15 to "turn to other challenges," potentially leaving the derivatives regulator with only two sitting commissioners pending further nominations and Senate confirmation.

—Read the full article from S&P Global Platts

Year In Pipelines: Growth In U.S. Natural Gas Pipeline Assets Slowed Again In 2020

The total value of U.S. interstate natural gas transportation and storage assets reported to the Federal Energy Regulatory Commission crept up in 2020, but year-over-year growth lost momentum, continuing a trend that showed up in 2019 after an active year in 2018.

—Read the full article from S&P Global Market Intelligence

GLOBAL GAS: U.S. LNG Supply Buildout Uncertainty Tests Global Market As Gastech Reconvenes

Twenty-one months after the coronavirus erupted, Cheniere Energy is talking aggressively again about LNG expansion in the U.S. As the country's biggest exporter of the super-chilled power plant fuel, Cheniere's assessment of the global market is often a signal of what the industry can achieve more broadly.

—Read the full article from S&P Global Platts

Written and compiled by Molly Mintz.