Discounting Future Risk

I was recently reminded of the movie Lord of War, when two prostitutes, Faith and Gloria, were sent to Nicolas Cage’s character by some warlord or another. Anyway, Cage is gently refusing the ladies’ advances when the topic of HIV comes up: Faith: [speaking softly] You worry too much. Gloria: [speaking softly] Why would you worry about something that can kill you in ten years where there are so many things that can kill you today? This second line is a brilliant example of how people think about risk. People will generally discount the future, sometimes by quite a bit.

Statistical Likelihood of Extreme Events and the Ellicott City Floods

This time, the flood hit close to home, literally. Over the last week, Ellicott City has responded after a very bad storm dropped nearly six inches of rain in only two hours. The recovery effort will be long and difficult, but the Ellicott City Partnership has done a remarkable job coordinating resources for both immediate and long term needs. The storm and its effects were severe and Ellicott City will require strong leadership, going forward. However, there’s been some accusations and finger pointing, about who may be responsible for inflicting what damage. The evidence given is usually the gross severity

The Private Flood Insurance Bill

The House of Representatives just passed a bill allowing private insurance to meet the flood insurance requirement for homeowners. In most cases, if you have a federally-backed mortgage, and you are on the 100-year floodplain, you have to have flood insurance. Federally-backed, in this case, means a conforming loan for Fannie Mae or Freddie Mac, or one issued by an FDIC or NCUA insured depository institution. There are some other cases, but that’s most of them right there. The purpose of this requirement is to protect taxpayers from liability through implicit liabilities through the GSE or depository insurance, after a

Political Risk and Export Finance

Here’s a great article on export credit. Following the fight over the Export-Import Bank of the United States, which I discussed here in 2014, here in 2015, here again in 2015, and in The Conversation last year, the bank was reauthorized by Congress after a brief shutdown period. Elaine Pofeldt has a good article in Global Trade where she discussed Ex-Im, the Overseas Private Investment Corporation, and other export finance options. Predictably, I make an appearance discussing political risk. You can get the full article on Global Trade‘s website: Sharelines When credit insurance broker Joel Berman reached out to the

Learn About Flood Insurance When Renting

Kayda Norman with QuoteWizard, the insurance purchasing website, interviewed me for a new article on the ins and outs of flood insurance for renters. A Preferred Risk Policy gives coverage for both the building and contents at a preferred rate. This policy is available for those living in moderate-to-low risk areas. Renters will only need to worry about purchasing contents coverage. “When you purchase a home, you purchase flood insurance for the contents and the structure. For renters, they generally only insure the contents since the building owner insures the building,” Dr. James Howard, statistician said. Read more at QuoteWizard:

Don’t Take the Annuity

The New York Times is wrong. Don’t take the annuity. Dear Powerball Winner: Take Our Advice and Take the Annuity So let us suppose, reader, that you have won Wednesday’s $1.5 billion Powerball jackpot. Congratulations! You have some important decisions to make, such as what ailing magazine to acquire and what congressional seat your spouse should run for. But first, you must choose whether to take the prize as an annuity paid over 30 years, or a lump-sum payment right now. There are several gaping flaws in the logic here. If you win the Powerball, don’t take the annuity. There