Summer of wildfires sees catastrophe bonds approach new record
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Wildfires raging across the U.S. and Europe this summer are pushing more and more insurers into slashing their risk by issuing catastrophe bonds to investors, and the so-called CAT bonds on the market are already nearing levels from all of last year.
Data-tracking service Artemis said this week that sales of CAT bonds, which allow investors to share some of the risk with insurance companies by betting against natural disasters, have leaped to almost $5.2 billion this year in the wildfire category. That’s approaching the $5.5 billion in issuance last year and almost double the amount of wildfire CAT bonds the year before.
Wildfires raging across Europe this summer, from France’s Bordeaux wine region to Athens in Greece to the Scottish Highlands, have already caused an estimated 3.1 billion euros ($3.6 billion) in damage, according to the Financial Times. Risk is spreading even faster from drought conditions, which have led to shipping declines on Germany’s Rhine River. In Hungary, authorities took the unprecedented action of detonating rock formations on the Danube to direct water flows to the country’s one nuclear power plant so it could stay in operation.
While the catastrophe bond market is still small, it is booming as disasters add up, and wildfire risk is the fastest growing of all natural disasters, according to Bloomberg. Even America’s exploding prediction markets, such as Kalshi and Polymarket, have seen gains in betting on wildfires to the point where U.S. regulators want to ban the practice for fear it will lead to more cases of arson.
Indeed, this summer of wildfires across the globe will lead to the spawning of several new types of businesses, from software modeling to using satellites to help track and fight fires. CAT bonds are quickly finding their place in the mix.
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Why green investing could be making climate change worse
. . . . It may sound bizarre, but green investing might be making climate change worse, writes Mark Hulbert. A new study that seemingly contradicts every tenet of sustainable investing concludes that even small investments in brown, polluting companies might be more beneficial to the environment than large ones in traditional, highly rated green companies. The reason, according to the authors from Boston College and Yale, is that since green companies already are lowering their emissions, more investment and lower cost of capital have smaller potential for additional progress. That’s compared to brown companies, where even a small reduction in emissions would have an enormous impact. Since most companies have their cost of capital reduced by investment and more money to put into projects, investing in brown companies might actually help more. A stretch? Maybe. But we’ve seen crazier things on Wall Street.
Thursday’s subscriber insights
SpaceX and the year of the AI cash grab
. . . . It’s likely no coincidence that SpaceX’s SPCX 0.00%↑ first earnings report as a public company came just after one of the strongest days of the year on Wall Street. Investor spending on the AI frenzy this year is driving stock markets to new records, and SpaceX and its tech rivals are taking full advantage.
At first glance, SpaceX earnings looked pretty good. Revenue surged 92% to $7.8 billion and net loss of $541 million was only about a quarter of the $2 billion expected. But investors immediately reacted to news that the company reported capital spending on AI at $16 billion in the quarter, more than double just the three months beforehand in the first quarter. Shares fell right away and traded as much as 14% lower on Wall Street on Tuesday.
Master earnings impresario Elon Musk said he expected full-throttle spending on AI for at least the next two quarters, mirroring what he said a few weeks ago when Tesla TSLA 0.00%↑ reported a similar capex blowout. He argued, quite correctly, that all the other tech giants were doing the same thing.
It has become obvious that as Wall Street chases the AI revolution ever higher, in a summer when first SpaceX — and soon Anthropic — go public in huge initial offerings, that tech leaders see this calendar year as the time to step on the spending pedal as hard as possible. When companies can spend this much money and stocks still rise to records, it’s simply a license to keep pushing the envelope.
SpaceX investors who bought the company’s IPO at $135 a few months ago and rode it up to $177 in the first week, are now underwater, and as of today sinking further. But there are several moves left for someone like Musk, including buying Tesla and merging it with his SpaceX operations.
This week’s market run seems to us to have all the trappings of a final melt-up, a last assault on record highs before traders return from summer vacation and begin fretting about the midterms and higher interest rates again. It can always go higher, but even the tech giants can’t spend freely forever.
Editor’s picks: Symptoms of climate change; plus, UN sounds a climate alarm
Watch the video: From extreme heat and wildfire smoke to expanding infectious diseases and rising healthcare costs, the impacts of climate change are showing up in hospitals and communities across the country. In this video from the Carnegie Endowment, Jenny Keroack, a former member of the U.S. Department of Health and Human Services’ Office of Climate Change and Health Equity, explains how climate change is reshaping healthcare, highlights innovative solutions already making hospitals more resilient, and discusses why these efforts can improve health while lowering costs.
Extreme weather disasters a global nightmare: UN
Climate-driven disasters are reaching “nightmare proportions” due to humanity’s “addiction” to fossil fuels, a top UN official warned this past week. “The climate alarm is blaring from every direction,” said UN Climate Change Executive Secretary Simon Stiell in a statement. More than 617,000 acres of land in Europe has burned, with 1,254 fires detected since the start of 2026. Record-breaking wildfires are tearing through France, Spain and other parts of Europe, forcing mass evacuations and hammering regional and national economies, following brutal heatwaves that have dried out landscapes, a report from UN news says. In Japan, records are tumbling as temperatures soar, now reaching the longest over 100°F heat streak ever recorded. Stiell said these “spiraling disasters” are now the lived reality for billions in a world getting rapidly hotter as humanity moves too slowly from fossil fuels to clean energy — and fails to sufficiently protect forests.
Latest findings: New research, studies and projects
Climate change could shrink water flow from the West’s headwaters
The flow of small mountain streams that feed many of the West’s rivers has been steadily declining across headwater watersheds in the western U.S. since 1950 and could decrease by 45% to 65% by the end of this century if current climate trends continue. Phys.org reports on a new study published recently in Earth’s Future that analyzes 75 years of streamflow data from 115 headwater basins across 11 Western states and uses machine learning models to project future conditions under multiple climate scenarios. Researchers found that warming temperatures, shrinking snowpack and increasingly dry conditions are already changing when and how water moves through mountain watersheds, according to the report. The base flow of these mountain streams “helps sustain water supplies, supports fish and wildlife habitat and helps maintain streamflow during dry periods. Reduced groundwater contributions could also increase vulnerability to drought and wildfire across the region,” the report says.
Words to live by . . . .
“Zeus has covered the wide heavens with cloud, and troubled the sea, and the tempest blast of every wind sweeps over me.” — From Homer’s “The Odyssey.”