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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Nathan Tankus is the research director of the Modern Money Network. He also writes the Notes on the Crises newsletter.

Hurricane Helene only dissipated September 29th, and Hurricane Milton — the first “category 6” hurricane, a category that has not yet even become generally accepted as a possibility — is set to make landfall today. Swift and sizeable disaster aid is going to be essential.

However, budgetary fights have left the Federal Emergency Management Agency with only stop-gap funding that they have already run through because of Hurricane Helene (along with four other natural disasters that have happened in the past few weeks alone.) Put simply, the funding to respond to Milton is not currently in place, and House Speaker Mike Johnson says he won’t call an emergency session of Congress to secure more FEMA funding.

Since Congress is only set to reconvene after the election, this could mean a new FEMA appropriations bill could take a month or more to be passed. Regardless of the final outcome in this particular situation, it’s clearly far from ideal for responses to increasingly disastrous hurricanes to live or die by ever more fickle vicissitudes of short-term Congressional appropriations negotiations. 

Enter the bond market. The Council of Development Finance Agencies is pushing the creation of a permanent category of “disaster recovery bonds” that would be exempt from federal taxation and issuable on the declaration of a state of emergency at the state level.

The point is that a federal subsidy for disaster relief would be available instantaneously at the local level rather than having to wait on federal dollars, which are often painfully delayed and inadequate. It also would be at their initiative since the state government — or a “political subdivision” such as a county — could decide the quantity and timing of the bonds they issue.

Of course, municipal bond markets are infamously illiquid precisely because of their reliance on complicated tax exemption subsidies. So it’s questionable whether further reliance on tax exemptions is really the best approach to supplying timely disaster relief finance. Regardless of whether we do, liquidity support would surely make municipal issuers more confident.

If this is all sounding vaguely familiar, it should. The Federal Reserve created the Municipal Liquidity Facility in April 2020 to deal with the financial effects of Covid-19 on municipalities.

Despite various problems, including its onerous pricing, it establishes a firm precedent for using the Federal Reserve’s 13(3) authority to lend in “unusual and exigent circumstances” in order to support municipalities. If natural disasters are not “unusual and exigent circumstances”, nothing is.

What would such a program do? Provide direct lending to municipalities just as the Municipal Liquidity Facility did. Eligibility would, similar to CDFA’s proposal for permanent disaster relief bonds, be based on the declaration of a state of emergency at the state level (or the territorial equivalent). The facility should have uniform pricing, and maturities maximised to make the most effective disaster responses possible.

Still panicky about inflation — and risk adverse in general — it’s understandable that the Federal Reserve has not taken the initiative in getting involved in disaster relief financing. But the Fed isn’t simply a financial market policymaker; it’s America’s pre-eminent macroeconomic government agency. And disaster-ravaged areas are part of the economy too.

It would be a dereliction of duty for the Fed to not get involved in making disaster-financing smoother. Whatever concerns there would be from the demand effects of ensuring timely and sufficient disaster financing must be weighed against the supply chain and productive capacity effects of allowing recovery efforts to be slower and less sufficient. 

More generally, this problem is probably only going to grow and grow in frequency and magnitude. Short-term considerations regarding the state of inflation shouldn’t define how the US central bank prepares for this. It should (if it has not already done so) develop contingency plans for a disaster relief liquidity facility.

If the Fed is unwilling to step into disaster financing for fear of Congressional criticism, then it should open such contingency plans up for public debate. Let the National League of Cities, the Council of Development Finance agencies, local constituencies and the general public react. Permanent natural disaster bonds would clearly fit seamlessly with such a liquidity facility proposal.

The Fed is, above all else, worried about its credibility and reputation. But being seen to help assistance reach ordinary people when they need it most would enhance its reputation in the public. Only acting urgently when bankers are in trouble is a reputational risk the Fed shouldn’t discount.

The economic impact of natural disasters in the US 

For those living in vulnerable areas to extreme weather disasters, recent years have seen some of the worst disasters. In 2024, we have seen severe weather disasters such as, the floods in Afghanistan- Pakistan, typhoon in Japan, the recent hurricane in Florida and more. Now, hurricane Milton is causing severe warnings and evacuations in Florida as they still face the outcome of their last hurricane, Helene. 

These disasters cause destruction to lives, families, property and more and the cost of repairing this once they can is substantial. We have taken a dive into the cost to the US economy, businesses and individuals when they are hit by a natural disaster 

The cost of weather disasters in the US 

Between 2020-2022 there were 60 natural disasters which cost over $1 billion in losses. With the worsening climate change, 2023 saw a record number of weather and climate disasters. In 2023, flooding events alone caused a total of almost $7 billion in damages in the U.S. 

The cost of property damage and destruction of infrastructure are often the most clear and immediate impacts, as homes, buildings, roads and more are damaged or destroyed. The economic impact also extends to business interruption, loss of jobs, reduced tourism and more which lead to further financial strain. 

The costs of repairing and rebuilding 

Hurricane Katrina in 2005 caused an estimated $125 billion in damage, with widespread destruction to property and infrastructure across New Orleans. The storm crippled businesses and left thousands without jobs, contributing to long-term economic stagnation in the region. Housing markets are heavily impacted by property damage. After Hurricane Katrina, housing prices in New Orleans dropped significantly as many properties were either destroyed or made uninhabitable. 

Not only did the storm Katrina impact infrastructure but also the essential businesses were halted. Katrina impacted up to 19% of the total US oil production as 24% of the country’s natural gas supply is housed in or around areas impacted by the storm. 20 offshore rigs underwent significant damage causing refineries to halt production. This was the first time in the country’s history that the national average gas price went over $3. 

Who pays for repairs? 

Contributions from the government  

Federal as well as local government are often the first to respond after a disaster, they will allocate money for emergency relief and reconstruction. Agencies like FEMA (Federal Emergency Management Agency) provide financial assistance to individuals, municipalities, and states to cover the cost of rebuilding infrastructure and homes. In 2027, the hurricane season brought 3 large disasters, the federal relief packages amounted to $130 billion. 

At the state and local levels, additional funds are provided, though these governments often struggle to meet the demands of large-scale recovery due to budget limitations. This has led to calls for increased federal support and better pre-disaster planning. 

Insurance Companies 

If you are a homeowner and you have property insurance you can file claims to cover damage to homes, cars, and other possessions. Unfortunately, not all areas of the US are equally insured, such as those areas prone to specific types of disasters e.g. hurricanes and wildfires. Insurance premiums have increased the prices due to the heightened risk.  

For example, after Hurricane Katrina, insurance premiums in coastal areas of the Gulf and Atlantic soared by as much as 20-30% in some regions. 

Some homeowners may not be able to afford sufficient coverage, leaving them vulnerable to significant financial losses after a disaster. Additionally, many policies don’t cover flooding unless a separate policy is purchased, as seen in the extensive uninsured losses from Hurricane Harvey, where only about 20% of homeowners in the Houston area had flood insurance. 

The impact on small businesses 

A 2017 FEMA report highlighted that 40% of small businesses never reopen after a disaster. In these cases, both individuals and businesses are forced to rely on personal savings, loans, or government assistance, which may not be sufficient to cover the full extent of the damage. 

Some of the hidden costs of weather disasters 

Employment: Natural disasters can have various effects on the economy of the local area which ripple through multiple sectors. With productivity down, businesses begin to struggle and even more so if their property has been damaged or destroyed. The money to restore the business may not be immediately available, causing the owners and all staff to be without employment for a prolonged amount of time.  

Housing market: When disasters hit, and if the area has been hit multiple times, it is likely to deter future residents. Currently, Florida is facing its second large hurricane within a month, this will likely persuade many to relocate and others to delay or cancel their move into the area. This will have a substantial impact on the housing market.  

Investments: For investors, an area prone to natural disasters will likely deter any development in the area. This can include property investment as well as developing the area with more businesses.  

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

London-listed companies will have greater flexibility to pay top executives higher salaries under new guidance from the UK’s £9.1tn investor body, despite a series of shareholder protests against bumper pay packets.

The Investment Association, the trade body representing 250 large investors holding important stakes in UK-listed companies, said on Wednesday that it had “simplified” its remuneration guidelines so that companies could set pay policies to “suit their specific needs” while also “being responsive to shareholder expectations”.

The move comes after prominent business figures called for higher executive pay to encourage companies to stay listed on the London Stock Exchange following an exodus of groups moving to the US, where executive remuneration tends to be higher. 

Andrew Ninian, a director at the IA, said the revised guidelines “demonstrate that investors want to incentivise delivery of long-term performance”. 

The investment body said its members wanted “a competitive” listing environment “that attracts companies to list and operate in the UK” and noted that “during the past year, there has been significant debate” on executive remuneration and “its impact on UK-listed companies”.

Companies’ remuneration committees use the IA guidelines when deciding whether to increase executive pay. Companies can deviate from the guidelines but shareholders generally expect the reasons to be explained.

Julia Hoggett, chief executive of the London Stock Exchange, said last year that UK executives should be paid more if the country wanted to retain talent and prevent companies moving overseas. 

The IA had committed last year to reviewing its guidance after pressure to respond to concerns that it was too rigid and made it difficult for companies with an international presence to attract top executives, particularly from the US.

Keith Barr, the former boss of InterContinental Hotels Group, is among a handful of executives to have left the UK in favour of the US. He warned that the UK was “not a very attractive place” for listed companies.

But the move to reward executives with higher pay risks stoking a greater backlash from some shareholders, after significant investor revolts against pay increases this year. AstraZeneca’s investors approved a potential £1.8mn increase for boss Pascal Soriot in April but the company was hit by a significant revolt from shareholders.

London Stock Exchange Group and Smith & Nephew were among the other FTSE 100 companies that pushed through higher executive pay deals at their AGMs this year. 

The updated guidelines allow for companies to benchmark executive pay against international rivals, noting that if a significant proportion of revenues are generated in an overseas market, such as the US, the remuneration committee “is encouraged to set out the impact of attracting global talent on the positioning of remuneration”.  

Luke Hildyard, director of the High Pay Centre, a think-tank, said that executive pay practices at global peers were “relevant in some instances” but noted that “few UK companies are of a similar size or global footprint as the biggest US firms, so comparisons are mostly redundant”.

Remuneration consultants at Alvarez & Marsal said the change was “positive” and “may help the market to develop a more rational and less emotionally charged framework for discussing pay levels”.

The new guidance also makes it easier for companies to adopt “hybrid” pay structures, which include long-term incentives that reward loyalty but have until now been more common in the US than the UK. Companies will also be given more flexibility on the level of director bonuses that must be deferred. 

The IA said boards should exercise discretion to “avoid rewarding or penalising executives for factors beyond their control or influence”. Alvarez & Marsal said this more flexible approach was “a significant change in tone from the IA”. 

Selecting the right platform is a bit like building a house: if the foundations aren’t stable then you’re in serious trouble further down the line.

I’m increasingly seeing advisers considering switching platforms looking to financial stability as that key foundation stone from which to build.

Today’s advice platform market is characterised by oversupply and frequent regulatory change, leaving a key problem for advisers to overcome – long-term stability.

A financially robust platform reassures advisers their chosen provider will endure market consolidation, invest in continuous innovation and maintain high service levels, while being able to adequately adapt to the pace of regulatory change.

Financial stability is about more than survival; it’s about thriving in a competitive market

Consumer Duty further underscores the need to take a more long-term approach. Advisers must ensure their platform partners can consistently meet these regulatory expectations, safeguarding consistency in service quality and good client outcomes.

Financial stability is about more than survival; it’s about thriving in a competitive market.

A stable platform is not a static platform. Instead, it’s a reliable partner that adapts, supports advisers’ evolving needs and provides the infrastructure to keep pace with technological advancements.

Without assessing a platform’s financial stability and ability to invest in development, advisers risk partnering with a platform that could struggle to sustain service quality or keep up with industry innovations, potentially putting their client relationships and business growth at risk.

Contrary to some opinions, advisers are open to exploring new platforms, but they generally need a trigger to make such a significant switch

Contrary to some opinions, advisers are open to exploring new platforms, but they generally need a trigger to make such a significant switch.

Realistically, a firm will only shift large volumes of business when there’s a compelling reason — which are often realised by concerns about their current platform’s financial health and levels of investment.

Consistency of service, back-office connectivity, and digital automation and experience give advisers an edge in an industry where marginal gains can make a real difference.

If doubts arise about a platform’s financial security, advisers should question whether they will continue to see these cornerstones of platform efficiency maintained.

Switching usually requires significant push factors that prompt advisers to consider their options. These can include long call wait times, processing delays, transaction errors and lack of accountability, all problems that damage client relationships and erode trust.

Platform charges have increasingly become a secondary consideration

Platform charges have increasingly become a secondary consideration. Charges across the industry are highly competitive, and advisers now view them as relatively uniform. Instead of focusing solely on costs, advisers weigh charges against a broader range of factors, like digital experience, investment choice, service model and overall value for money.

Platform charges represent only a small portion of the total cost of advice, which includes adviser fees and investment management costs. So, with cost differences between platforms generally minimal and one eye on Consumer Duty, advisers are beginning to prioritise the long-term viability of a platform over short-term savings.

With a focus on value mandated by Consumer Duty, advisers are gravitating towards platforms that have greater resources at their disposal. These are more capable of investing in reliable service and support, which ultimately benefits clients and helps advisers to scale their businesses.

Why onboarding matters

A seamless onboarding experience is essential for affirming advisers’ confidence in their decision to switch platforms. This process is their first impression of the new platform and sets the tone for their platform experience.

A well-designed onboarding process should be efficient, transparent and supportive, according to the individual needs of advice firms. This process involves not just the technical aspects of transferring data and setting up accounts but also clear communication, training and ongoing support.

Delivering all this requires investment, not just at the start, but as part of a continuous review process.

Effective onboarding can transform what is seen as a daunting process into a smooth, positive experience

By minimising the friction involved in switching and providing comprehensive assistance during the transition, platforms can reduce perceived barriers to change.

This proactive approach instils a sense of trust and reliability, which fosters long-term loyalty, making advisers more likely to stay with the platform and recommend it to others. Effective onboarding can transform what is seen as a daunting process into a smooth, positive experience.

While multiple factors influence platform selection and switching, we are seeing the emergence of financial stability as a critical element.

In an era of market oversupply and rapid technological change, advisers are increasingly recognising and seeking out platforms that are operationally efficient and financially secure.

Understanding these dynamics allows platforms to better position themselves to meet the evolving needs of advice firms and their clients to deliver mutual future success.

Ranila Ravi-Burslem is intermediary distribution director at Scottish Widows

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

There are signs of stirring from the slumbering form of Radiohead. According to bassist Colin Greenwood, the band convened for rehearsals over the summer, eight years after their last album, A Moon Shaped Pool. Their reactivation, if it continues, would be a big event. But I hope it won’t result in The Smile being wiped from the schedules of Thom Yorke and Jonny Greenwood.

The album is the second this year from the Radiohead duo’s spin-off band. It teams them with drummer Tom Skinner of London jazz group Sons of Kemet. Their busy output resembles a release of pent-up energy, somewhere between a satellite orbiting Radiohead and an escape craft heading for parts unknown. As though loosened up by Skinner’s supple skills, Yorke and Greenwood sound almost frolicsome amid the songs’ twisty dynamics and brooding lyrics.

Cutouts was made during the same recording sessions as Wall of Eyes, which came out in January. In July Greenwood was hospitalised with an unspecified infection, receiving treatment in intensive care. He has now recovered, although The Smile had to cancel a European tour — an unfortunate check to the momentum that they’ve built up since their 2022 debut, A Light for Attracting Attention.

The new album lacks a peak comparable with Wall of Eyes’ “Bending Hectic”, a dizzying art-rock wig-out, but its 10 tracks flow together very well. “Foreign Spies” is an electronic ballad with echoes of 1970s cosmic music and a melody adapted from Greenwood’s 2019 orchestral composition “Horror vacui”. Its dreamy tempo feeds into “Instant Psalm”, a hymnal psychedelic number with another tender vocal turn from Yorke.

“Zero Sum” picks up the pace with Greenwood’s wiry guitar riffs and Skinner’s richly layered percussion. Yorke’s lyrics evoke a familiar sense of dread, but his singing is responsive and versatile. In “Don’t Get Me Started”, his voice cries out amid echo effects as if in a void. For “Bodies Laughing”, he conjures a grotesque scenario involving mockery and physical disgust in a needling high croon. Like the rest of the album, the song gets under your skin.

★★★★☆

‘Cutouts’ is released by XL Recordings