Artificial intelligence isn’t getting a papal blessing.
Pope Francis delivered a warning earlier this week on the “disruptive possibilities and ambivalent effects” of artificial intelligence. The pope urged us humans to maintain “an open dialogue” about AI technology to protect “the most fragile and excluded” as we build bots that are smarter and faster than any living thing. The potential risks of AI have been raised by several AI experts who worry about the spread of misdeeds that could wreak havoc around the world as the technology ramps up. Well said, Your Holiness — if it really is you and not some AI-generated deep fake.
Morning Brief
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The storm has already come for insurers.
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ESPN Bet could be the new big name in gambling.
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Amazon’s drone deliveries hit turbulence.
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Insurance
Insurers Have Already Lost $50 Billion This Year from Natural Disasters
(Photo Credit: Chris Gallagher/Unsplash)
Climate change has precipitated a landslide in insurance industry profits.
Globally, the industry has been hit with $50 billion in losses this year due to the nonstop procession of natural catastrophes. And as destructive weather events become more frequent and extreme, so will insurers’ woes, according to a study published by Swiss Re Group Wednesday.
Not So Lovely Weather We’re Having
Over the last 40 years, the number of storms, floods, droughts, wildfires, freezes, and blizzards resulting in more than $1 billion in damages has risen dramatically in the US, even when adjusted for inflation, according to the National Centers for Environmental Information. And while the phrase “new normal” is often used to describe the current destructive phase, climate scientist Shuang-Ye Wu told The Conversation that’s not quite accurate. “To say this is the new ‘normal,’ though, is misleading. It suggests that we have reached a new stable state, and that is far from the truth.”
The majority of this year’s insurance losses around the world — $35 billion worth — were caused by a series of convective storms with heavy rains, strong winds, temperature changes, thunder, lightning, and hail that hit the US, Swiss Re estimated. Besides that, the costliest disaster was the February earthquake in Syria and Turkey, which resulted in $5.3 billion in losses. As a result, insurance companies are mitigating losses and raising premium rates wherever they can:
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AllState and State Farm have stopped accepting new property insurance applications in California, a state that’s consistently at risk for wildfires. Though this has been a relatively mild year to date, the Golden State has experienced more than 4,000 wildfires that burned 113,000 acres and severely damaged or destroyed 20 structures, according to state data.
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Firms are also increasing rates to cover the fallout from catastrophes. For the first half of the year, insurance company Hiscox said its rates are up an average of 34%, and North American natural catastrophe reinsurance prices are up 43%.
“Protective measures need to be taken for insurance products to remain economical for such properties at high risk,” Swiss Re’s Chief Economist Jérôme Jean Haegeli said, “It is high time to invest in more climate adaption.”
Growing Pains: Urban expansion is also at play. Cities and towns are growing in high-risk areas, and with the cost of construction materials still greatly inflated compared to three years ago, insuring new developments is a lot more expensive. “Besides the impact of climate change, land use planning in more exposed coastal and riverine areas, and urban sprawl into the wilderness, generate a hard-to-revert combination of high value exposure in higher risk environments,” Haegeli said.
–Griffin Kelly
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Sports
DraftKings Looks a Little Woozy After Penn’s ESPN Bet Deal
The biggest name in sports broadcasting may just become the biggest name in sports betting.
ESPN announced a new sportsbook partnership with Penn Entertainment late Tuesday, and the immediate losers were shareholders of competitor DraftKings, which saw its share price drop nearly 11%by the close of Wednesday’s market.
Never Tell Me the Odds
The wide world of sports betting has been going gangbusters. You can’t watch a game or a fight without being bombarded by ads featuring celebrities like Jamie Foxx, J.B. Smoove, or Kevin Hart shouting at you about parlays, dogs, and big payouts. Last year, the US commercial sports betting industry generated $7.5 billion in revenue — a staggering 73% increase from a year earlier — according to the American Gaming Association.
It’s frankly a little odd it took ESPN this long to hop on the money train. On Tuesday, the network said it would team up with Penn in a 10-year deal to rebrand the gaming firm’s sportsbook to ESPN Bet:
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Penn is paying $2 billion in cash and stock warrants over the next decade to essentially use ESPN’s name. And while Penn is sitting pretty — its stock rose 9.1% on Wednesday — DraftKings is in a rough spot.
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ESPN, a division of Disney, already has a non-exclusive marketing deal with DraftKings, in which it also owns a stake of less than 5%. But the Penn deal could mean ESPN eventually cuts ties with DraftKings, MoffettNathanson analyst Robert Fishman said in a note to clients Wednesday.
Betting on a Future: Disney has been running a magic deficit lately. Even returning CEO Bob Iger hasn’t yet fully revived the company after a series of poor box office performances, dwindling amusement park sales, and millions of subscribers leaving the Disney+ streaming service. Gambling may not be what Uncle Walt had in mind when he created his family-friendly kingdom, but it might be one of many concessions the House of Mouse needs to make to pull itself out of the briar patch.
–Griffin Kelly
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Amazon’s Drone Delivery Venture Struggles to Get Off the Ground
It’ll be a while before that long-promised drone alights on your doorstep with your Amazon purchase.
Amazon Prime Air, the e-commerce titan’s drone-based delivery service, lost two crucial executives this week, including its chief pilot and head of test operations. Amazon Executive Chairman Jeff Bezos wanted a beta test of the service to be flying to customers’ doors by mid-2024, an ambitious deadline that now seems even more so. Bezos, however, does tend to move the goalposts: he originally promised deliveries in 2018.
Air Mail
CNBC reported this week that Prime Air’s chief pilot Jim Mullin and test operations manager Robert Dreer both left the venture in recent months. A former Marine Corps director of attack helicopters, Mullin had worked for Amazon for more than 7 years.
Even if Amazon hasn’t cracked the technology just yet, the market still has potential. At the time of a March 2022 McKinsey analysis, there were more than 2,000 commercial drone deliveries a day. Sixty percent of Americans said they’d use a drone shipment if it was available, though only 17% of US consumers said they’d pay extra for fast drone shipping.
Prime Air’s competitors include Palo Alto, California-based Wing, San Francisco-based Zipline and London’s Skyports. Amazon could acquire one or several of these competitors to boost its struggling business, but there are no definitive signs of a deal on the horizon:
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Amazon laid off 18,000 people in January, and a “significant number” were Prime Air staffers.
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Per CNBC, Prime Air completed only 100 deliveries between California and Texas as of this past May, a far cry from the annual goal of 10,000.
Catch-up Regulation: Drone deliveries are still not completely regulated and government oversight could change how Amazon Prime Air and others are allowed to operate. The FAA controls drone flights, and has already slapped Amazon’s wrist for skirting investigations into crashes. Amazon is testing its latest drone, the MK30, expected to release this year. But by the time it scales up the fleet, there could be guardrails in place making it even costlier to operate.
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