Kalshi Hurricane Markets

If you live in Florida, there’s a haunting presence in your life. No, not that guy*. 

Every July, you buy a mountain of bottled water, tinned food and wine. You refresh the gas in your generator, the batteries in your flashlights. You wonder if you’re still young enough to carry all your patio furniture and pot plants inside in a hurry.

Yep, it’s hurricane season, your annual opportunity to contemplate the nature of probability on a very personal level. Most people who say “I’d bet my house on it” are speaking hyperbolically. In Florida, it’s just what you do every summer and fall.

Well, fellow folk of Florida (and all other hurricane zones), some good news. Your insurance coverage may be crappy but now you can hedge your risk another way with a trade on Kalshi’s several hurricane markets.

Kalshi has hurricane markets for Miami and Orlando, several coastal locations along the Gulf, Texas, the Carolinas, as well as other areas. You can refine your position by Hurricane Category level.

I’m going to guess that these markets will be contested between people who live in the hurricane zone and those who don't. If you live in the hurricane zone, you may be inclined to buy the market to give yourself some compensation if a storm comes your way. If you live outside the hurricane zone, you can become your own actuary and sell that compensation to the luckless people in the zone. 

This will be a welcome alternative in an insurance market that has been broken for several years. Think of it as a distributed solution, which harks back to the noble days of the origins of modern insurance in Lloyds coffeehouse coffee house in London**.

Florida insurers have been hiking premiums, requiring improvements, canceling policies, and even outright fleeing the state. Being an insurance executive here must be a complete nightmare. If it was just the risk-premium-reserves calculation, that would be difficult enough. But it’s much more. One, everybody hates you and beats on you – homeowners, politicians, journalists, radio loudmouths, contractors, whoever. Two, you are besieged by fraudulent grifters. Roof replacement is a major grift in Florida. Insurers claim that fraud relating to roofing damage claims is the principal cause of the virtual collapse of the insurance market.

But anonymous counterparties in the Kalshi market don’t have to deal with any of that. Folks in bucolic Pennsylvania can sell us Floridians alternative hurricane compensation through these markets without any hassle at all.

Question for non-Florida residents: what’s a spaghetti plot? 

If you don’t know the answer, pause before you plunge into this market.

That is a spaghetti plot, or model, chart, whatever. The different lines are the path projections for a hurricane currently located at the red whirlybird. Each path is associated with a different model. Everyone in Florida has their own favorite model, especially competing meteorologists.. 

So if you’re going to be in this market, inform yourself on spaghetti plots, but don’t get married to them. Sometimes, ALL the plotlines are wrong. Wrong on direction, wrong on storm force, wrong on speed. Hurricanes are just so loaded with variables. Don’t sleep on your positions – hurricanes duck and dive. I once evacuated my home and scampered to a hotel two hours drive inland. The storm did a swerve away from my house and hit the hotel. The bar was closed.

Disclosure: Stan_DV8 holds positions in the hurricane markets. But you guessed that.

Footnotes

* I am referring, of course, to the widely-feared Florida Man, who can leap out at you expectedly wherever and whenever you are in the sunshine state. There’s only one place in the world where you can get this opening to a real news story: 

** The old model of insurance is pretty much incompatible with late-capitalism. The idea of long-term reserves for events that might occur maybe once a decade or less, is anathema to executives who expect to be bonused on last quarter’s non-GAAP profit. 

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