personal-finance

Harvey Costs Seen at Catastrophic Levels With Many Uninsured

Hurricane Harvey’s second act across southern Texas is turning into an economic catastrophe — with damages likely to stretch into tens of billions of dollars and an unusually large share of victims lacking adequate insurance, according to early estimates.

Harvey’s cost could mount to $30 billion when including the impact of relentless flooding on the labor force, power grid, transportation and other elements that support the region’s energy sector, Chuck Watson, a disaster modeler with Enki Research, said in an email Monday. That would place it among the top eight hurricanes to ever strike the U.S. David Havens, an insurance analyst at Imperial Capital, said the final tally might be as high as $100 billion.

Less than a third of Harvey’s losses are likely to be insured, Watson said.

Steve Moore, a 68-year-old who owns Houston’s Villa Serena Communities, about 5,000 apartment units that rent for about $500 a month each, expects more than $10 million of damage. Moore said the buildings aren’t fully insured.

Many of the low-income residents who live on lower floors of his buildings near the Houston airport had some flooding, but nobody was hurt, he said.

“I’m pretty depressed this morning,” said Moore, who tripped on a curb earlier Monday while surveying the damage and lost his phone and credit cards in three feet of water. “It’s just a mess.”

“A historic event is currently unfolding in Texas,” Aon Plc wrote in an alert to clients. “It will take weeks until the full scope and magnitude of the damage is realized,” and already it’s clear that “an abnormally high portion of economic damage caused by flooding will not be covered,” the insurance broker said.

Many forecasters were hesitant over the weekend to make preliminary estimates for how much insurers might pay. Researchers were shifting from examining Harvey’s landfall Friday as a roof-lifting category 4 hurricane to the havoc it later created inland as a tropical storm. Typical insurance policies cover wind but not flooding, which often proves costlier. Blaming one or the other takes time.

Insurers were among the biggest decliners Monday in the S&P 500 Index, with Travelers Cos. dropping 2.8 percent and Progressive Corp. down 2.5 percent at 12:22 p.m. in New York.

In the Houston area, rainfall already has surpassed that of tropical storm Allison in 2001, which wreaked roughly $12 billion of damage in current dollars. In that case, only about $5 billion was covered by insurance, according to Aon.

Those storms are dwarfed by Hurricane Katrina, which struck in 2005 and devastated New Orleans. By some estimates, it inflicted $160 billion in total economic damage. About 47 percent of Katrina losses were covered by the insurance industry, but only about 27 percent is expected to be insured for Harvey, Watson said.

Most people with flood insurance buy policies backed by the federal government’s National Flood Insurance Program. As of April, less than one-sixth of homes in Houston’s Harris County had federal coverage, according to Aon. That would leave more than 1 million homes unprotected in the county. Coverage rates are similar in neighboring areas. Many cars also will be totaled.

“A lot of these people are going to be in very serious financial situations,” said Loretta Worters, a spokeswoman for the Insurance Information Institute. “Most people who are living in these areas do not have flood insurance. They may be able to collect some grants from the government, but there are not a lot, usually they’re very limited. There are no-interest to low-interest loans, but you have to pay them back.”

The federal program itself is already struggling with $25 billion of debt. The existing program is set to expire on Sept. 30 and is up for review in Congress, which ends its recess Sept. 5.

Stranded vehicles in Houston on Aug 28.

Photographer: Erich Schlegel/Getty Images

Investors Brace

Costs still will likely soar for insurance companies and their reinsurers, biting into earnings. As Harvey bore down on the coastline Friday, William Blair & Co., a securities firm that tracks the industry, said the storm could theoretically inflict $25 billion of insured losses if it landed as a “large category 3 hurricane.”

Policyholder-owned State Farm Mutual Automobile Insurance Co. has the largest share in the market for home coverage in Texas, followed by Allstate Corp., which is publicly traded. William Blair estimated that, in that scenario, Allstate could incur $500 million of pretax catastrophe losses, shaving 89 cents off of earnings per share.

Investors began bracing for losses last week. But many didn’t believe that Harvey could wipe out bonds that were issued to protect insurers against storm damage in the region, according to Brett Houghton, a managing principal at Fermat Capital Management. His firm manages more than $5 billion, with allocations to catastrophe bonds.

The Swiss Re Cat Bond Price Return Index dropped 0.44 percent in the week ended Aug. 25, the steepest decline since January. The benchmark is recalculated every Friday, so it’s unclear how the debt performed as the storm continued through Sunday. Reinsurers, which provide a backstop for primary carriers, also may get burned. That group include Bermuda-based companies Arch Capital Group Ltd., Axis Capital Holdings Ltd. and RenaissanceRe Holdings Ltd., according to a note last week from Meyer Shields, an analyst at Keefe, Bruyette & Woods.

Flooding and debris after Hurricane Harvey hit Rockport, Texas, on Saturday, Aug. 26.

Photographer: Alex Scott/Bloomberg

Interrupting Business

Businesses are probably better covered than individuals. Companies across the retailing, manufacturing, health-care and hospitality industries will be seeking reimbursements from insurers for lost revenue during the storm and subsequent repairs, said Aon’s Jill Dalton, who helps manage claims.

But for Texas’s massive energy industry, it’s still too early to project how badly the storm will disrupt supply and distribution. That’s because the devastation keeps spreading.

“If it continues to rain, I just don’t think the situation is going to get better any time soon,” said Rick Miller, who leads Aon’s U.S. property practice. “In fact, it could get a lot worse.”

09.25.17 Credit Cards

Heres What Your Identity Sells For on the Dark Web

How much is your personal data worth to you? A (Thanks, Equifax.) And how much is it worth to an identity thief?

You may be surprised, or insulted, or enraged, to find out.

Verified high-limit credit cards from countries including the U.S., Japan, and South Korea are selling on the dark web for the bitcoin equivalent of about $10 to $20, according to an annual report on cybercrime by Secureworks, a unit of Dell Inc.

The dark web is “the collection of Internet forums, digital shop fronts and chat rooms that cybercriminals use to form alliances, trade tools and techniques, and sell compromised data that can include banking details, personally identifiable information and other content,” as Secureworks defines it.

Verified means the seller has tested out transactions on the card and found it hasn’t been canceled yet. For scammers on a budget, there’s unverified stolen credit card data, which comes out to pennies a card when bought in bulk.

This is a screen grab of merchandise for sale on the dark web. It’s a little fuzzy but you get the awful idea.

Credit cards generally aren’t selling any cheaper on the dark web these days, said Alex Tilley, a senior security researcher on Secureworks’ counter threat unit research team. But buyers are more likely to get higher-quality cards today, ones with sizable limits and suitable properties for fraud. It isn’t as hit-or-miss as it used to be—a welcome change for criminals, chilling news for most of us.

Business credit cards are in favor, since they sometimes have no limit on spending, Tilley said. Those and high-end personal cards—say, a Platinum American Express that has been verified and has an 85 percent rating (judged by the seller to have an 85 percent chance of being successfully used in a fraud)—will go for $15 to $20. A regular Mastercard that doesn’t have a big limit might go for $9. An underground market inexplicably called Trump’s Dumps is one of the many sellers of this kind of stolen credit card data.

But wait, there’s more. Underground markets also sell full identities of individuals just like you for as little as $10 apiece. They’re called fullz, “dossiers that provide enough financial, geographic and biographical information on a victim to facilitate identity theft or other impersonation-based fraud,” the report explains. Fullz can help a criminal get past those irritating “secret questions” that sites ask to verify your identity.

Recently, Secureworks’ researchers have seen more offers of bulk pre-verified card details, along with more identifying information about the owners. In some cases, offers even include the cardholder’s mother’s maiden name. Still, they cost just $10 to $12. Below is a fullz offer with a lot of personal identification on a Korean consumer.

In fact, the prices Secureworks cites for these examples of personal data are lower than what fraudsters have been willing to pay for documents like W-2s, which can be used to file false tax returns. Tax-filing data, which don’t expire, can go for about $40 to $50, according to a report from IBM’s security research group, known as the IBM X-Force, published earlier this year. The researchers found one vendor selling W-2 and 1040 returns as a package for $30; if a buyer wanted information on that person’s adjusted gross income it would be another $20.

No piece of personal information is innocuous, Tilley said. Criminals will amass bits of data on people, waiting until they have enough that their fraud attempt is likely to succeed.

“Everything is valuable,” he said. One bit of information “could be the last piece of a puzzle someone needed to take out a loan in your name. You don’t know how far along criminals are until it’s too late.”

Credit monitoring and freezes could be the only hope of protecting yourself, Tilley said. “The problem is that you put a lot of trust in the third-party companies that hold your data, and that’s a little out of your control.”

Tell us about it.

(Corrects eighth paragraph to describe what Trump's Dumps does.)

09.11.17 Tax Free Retirement Program

BlackRock Is in Talks for Calpers’s Buyout Business

The largest U.S. pension fund is talking to BlackRock Inc. about outsourcing its private equity business as it seeks to control fees and offset anemic returns, people familiar with the matter said.

The California Public Employees’ Retirement System is in discussions with New York-based BlackRock about managing some or all of its $26.2 billion in private equity investments, said the people, who asked not to be identified because the conversations were private. The discussions are preliminary, they said.

Calpers spokesman John Osborn and Brian Beades, a spokesman for BlackRock, declined to comment.

Calpers is reckoning with criticism over its private equity investing and how it discloses and accounts for fees. The pension giant convened a panel of executives, including Carlyle Group LP’s Sandra Horbach and BlackRock’s Mark Wiseman, to discuss possible models during a board meeting in July. Calpers leadership raised questions about challenges of bringing direct-investing capabilities in-house, contracting with outside managers or creating an independent entity with appropriate oversight.

Target Cut

Calpers, which manages about $333 billion on behalf of police officers, firefighters and other current and retired government employees, is trying to improve its investment performance and reduce fees amid low returns across many asset classes. In December, Calpers voted to cut its long-term return target from 7.5 percent a year to 7 percent, a move that will require larger contributions from workers and taxpayers.

The mandate would be a big win for BlackRock, which is best known for offering lower-fee passive products, such as iShares exchange-traded funds. The world’s largest money manager, which oversees $5.7 trillion in assets, has been trying to expand its more lucrative alternatives business to increase fee revenue and meet client demand for investments that aren’t closely correlated to the stock and bond markets.

BlackRock’s $128 billion alternatives business includes private equity, real estate, infrastructure and hedge funds. The firm hired Wiseman last September as chairman of the unit and global head of active equities. He previously led the Canada Pension Plan Investment Board and directed the private equity efforts at Ontario Teachers’ Pension Plan Board.

Real Desrochers, the head of Calpers’s private equity division, quit in April. The fund hasn’t announced plans to replace him.

personal-finance