Marketplace Podcast Summary: "Who Insures the Insurers?" Hosted by Kai Ryssdal | Release Date: November 5, 2024

1. Aviation Industry Backlogs and Supply Chain Challenges

Timestamp: 00:02 – 03:10

The episode opens with Kai Ryssdal discussing the significant backlog in the aviation industry, highlighting Boeing's recent contract vote with the International Association of Machinists and Aerospace Workers. With a backlog exceeding 6,000 planes and similar figures from Airbus, the industry faces substantial delays. Henry Epp from Marketplace explains how Boeing's year was tumultuous, starting with a door plug blowout in January that led the federal government to limit production capacities.

Fakery Karanki, an assistant professor at Purdue University, adds, “After the pandemic, actually, we observed a huge demand increase in both air freight and passenger sides” (01:27). However, COVID-19 severely disrupted the aerospace and defense manufacturing supply chain. Peter Arment, managing director at R.W. Baird, emphasizes the loss of skilled workers during lockdowns: “A lot of older, skilled workers at those suppliers left and didn't come back” (01:46). This loss has diminished productivity, exacerbating existing supply chain struggles and contributing to the large backlogs, which ultimately hold back airlines from operating newer, more efficient planes. Henry Hartevelt from Atmosphere Group warns, “If they don't get more new planes soon, passengers could start to feel it” (02:53).

2. Insurance and Reinsurance: Protecting the Protectors

Timestamp: 03:10 – 08:19

Transitioning from aviation, Ryssdal delves into the financial implications of recent natural disasters, specifically Hurricanes Helene and Milton, which together are estimated to cause $100 billion in damages. While large insurance conglomerates can absorb such losses through reinsurance, smaller insurers may face solvency issues.

Sabri Benishour from Marketplace discusses how reinsurance acts as insurance for insurance companies. Rob Newbold, president of The Extreme Events Solutions team at Verisk, explains the concept: “Reinsurance only kicks in at a certain level of desperation” (06:10). The global reinsurance market, valued at $585 billion in 2023, is projected to grow to $1.3 trillion by 2033. However, rising premiums and increased frequency of disasters strain the system. Tim Zawacki from S&P Global Market Intelligence notes, “Reinsurance rates that insurance companies have to pay can go up as much as reinsurers say they need to” (07:40), leading to potential rate hikes for consumers.

In North Carolina, insurance companies have sought permission to raise home insurance rates by over 50%, a move likely to impact homeowners significantly. James Eck from Moody's Ratings emphasizes the necessity of reinsurance for maintaining insurer viability, especially in the face of escalating natural disasters.

3. Rising Health Insurance Costs and Impact on Small Businesses

Timestamp: 08:19 – 12:23

Ryssdal shifts focus to the rising costs of health insurance and its repercussions for small businesses. According to the Bureau of Labor Statistics' Employment Cost Index, employers are paying approximately 3.5% more for healthcare than the previous year. Kimberly Adams from Marketplace outlines factors driving these costs, including higher labor costs and the addition of expensive drugs and services to health plans.

Richard Trent of the Main Street Alliance explains, “When small business owners have to contend with these elevated prices, it means that that's money that they're spending that they could be spending elsewhere” (10:07). This financial strain forces businesses to make tough decisions, such as reducing benefits or increasing prices. Kosali Simon, a health economist at Indiana University, warns about the delicate balance small businesses must maintain in using health insurance as a recruitment and retention tool without overburdening their finances.

Matthew Ray from KFF highlights that while health insurance premiums have been growing roughly in line with inflation and worker earnings over the past five years, the burden still significantly affects both employers and employees. The average family health insurance plan now costs over $25,000, posing substantial financial challenges across the board (11:41).

4. Small Business Spotlight: Rita Magalde's Bakery Journey

Timestamp: 12:23 – 20:59

The podcast features an inspiring story of Rita Magalde, owner of Sheer Ambrosia, a specialty bakery in Salt Lake City. After moving her business from a home kitchen to a commercial space, Rita details the challenges and triumphs of scaling her operations.

She recounts the financial strain of renovating a shell property, stating, “I had to spend $70,000. So I had to take out an SBA loan” (14:10), leaving little for marketing. Despite these hurdles, Rita successfully expanded her product line to include granola chocolate chip cookies and traditional Greek pastries like Corambiedes. Her perseverance is evident as she shares, “It's been a lean summer. And so that's why it was so important for me to start launching some other products besides the baklava” (14:50). Rita's story underscores the resilience required to navigate the complexities of running a small business, especially in the face of financial and logistical challenges.

5. Spain's Devastating Floods and European Food Supply Concerns

Timestamp: 18:12 – 20:59

Ryssdal reports on the catastrophic flooding in Valencia, eastern Spain, which has resulted in over 200 deaths and extensive damage to infrastructure and agriculture. William Masters from Tufts University explains Spain's pivotal role in producing Valencia oranges, olives, tomatoes, and rice. The floods threaten to disrupt the food supply chain, leading to potential shortages and increased grocery prices across Europe.

Matthew Ray from KFF notes, “The floods in Spain and the ripple effects in Europe and the UK highlight an important thing in terms of how do we respond to climate change” (20:23). Tafadzwa Mabodi at the London School of Hygiene and Tropical Medicine emphasizes the interconnectedness of global food systems, indicating that while countries like the UK may find alternative sources for their produce, the immediate aftermath could see significant market fluctuations and shortages.

6. Lithium Mining in Arkansas: A New Frontier for the Green Economy

Timestamp: 20:59 – 25:29

The episode concludes with an exploration of lithium extraction in Arkansas, a critical component for electric vehicle (EV) batteries and energy storage solutions. Elizabeth Trobal from Marketplace reports on the discovery of substantial lithium reserves in the Smackover formation, potentially holding between 5 and 19 million tons. This region, historically known for oil and natural gas production, is now eyed for lithium due to accessible brine with high lithium concentrations.

John Shah from the University of Arkansas expresses optimism about the viability of lithium extraction: “I think it can be done in a safe way and a generally beneficial way” (22:55). However, challenges remain regarding the commercial viability and environmental impact, particularly concerning water usage. Despite these hurdles, companies like Standard Lithium, Exxon Mobil, and Terravolta are investing heavily in this promising but uncertain endeavor. The U.S. government's recent grants of nearly half a billion dollars to support direct lithium extraction underscore the strategic importance of developing domestic lithium sources to reduce dependence on foreign suppliers.

Conclusion

In this episode of Marketplace, Kai Ryssdal navigates through a spectrum of pressing economic and business issues—from the daunting backlogs in the aviation industry and the intricate mechanisms of insurance and reinsurance, to the rising healthcare costs affecting small businesses, inspirational small business stories, the far-reaching impacts of natural disasters on global food supplies, and the emerging potential of lithium mining in Arkansas. Each segment provides insightful analysis and expert perspectives, painting a comprehensive picture of the interconnectedness of today's economic landscape.

This summary captures the key discussions, insights, and conclusions from the "Who Insures the Insurers?" episode of Marketplace. Notable quotes are attributed with corresponding timestamps to provide context and depth.