Good morning. Thunderstorms in 2023 caused $76 billion in losses in North America and Europe, reports Risk & Compliance Journal’s Richard Vanderford.

It’s a record for such weather events, which have in recent years begun to rival hurricanes in terms of the damage they collectively mete out to businesses and homes.

• The phenomena: The weather events, formally known as severe convective storms, in North America destroyed assets valued at $66 billion, according to an analysis of the year’s natural catastrophes released Tuesday by reinsurer Munich Re. About $50 billion of that was insured.
   
• The impact from two storms: In the U.S., two thunderstorm series—a Midwest storm in March and a Texas storm in June—together caused $17 billion in losses, contributing to the highest level of total thunderstorm losses the country has seen, Munich Re said.
   
• The heat is on, worldwide: The record global temperatures that spawned the heavy rainfall, disastrous floods and raging wildfires in 2023 will likely continue in 2024, according to the European Union’s Copernicus Climate Change Service. The service is the first analysis to declare—after months of speculation—that 2023 was the hottest year since record-keeping began in the mid-1800s.

Also see: 

• Severe Storms Sweep the U.S., Bringing Blizzards, Flooding, High Winds

Finra calls AI ‘emerging risk’ in annual regulatory report.

The Financial Industry Regulatory Authority, Wall Street’s self-regulator, has classified artificial intelligence an “emerging risk” in its annual regulatory report, saying that deploying AI in the industry could affect virtually all aspects of a broker-dealer’s operations.

Despite concerns over accuracy, privacy and bias with the use of AI, Ornella Bergeron, a senior vice president in member supervision with Finra’s risk monitoring program, said the agency has seen member firms so far take a careful approach to AI's use.

"Honestly, from what we’ve been hearing so far, firms are being very cautious and they’re being very thoughtful when considering the use of AI tools as well as before deploying these technologies,” said Bergeron in a podcast accompanying the report.

SEC says ‘hack’ prompted misleading post on bitcoin ETF approval.

The Securities and Exchange Commission’s official X account was hacked when the agency posted late Tuesday that it had approved exchange-traded funds holding bitcoin, forcing Chair Gary Gensler and the regulator to disavow the erroneous post.

Bitcoin briefly jumped to near $48,000 before Gensler said on the social-media network that the message was “unauthorized” and that the SEC “has not approved the listing and trading of spot bitcoin exchange-traded products.” The agency later posted that its account was “compromised.”

A decision on the funds is expected on Wednesday.

• The Biden administration issued a new rule Tuesday intended to put more contractors on company payrolls, a change that could reverberate across a range of industries, including healthcare, restaurants, construction and transportation.
   
• The European Union is considering whether to launch a review of Microsoft’s investment in ChatGPT maker OpenAI under the bloc’s merger regulations, a month after the U.K. said it was also weighing whether the tech partnership could have an impact on competition.
   
• A Chinese delivery company backed by Walmart said internal auditors had found suspicious practices that cast doubt on nearly $70 million of recent sales.
   
• A House committee on Tuesday requested a laundry list of documentation from Harvard University in its investigation into anti-Jewish activity at the school and the steps Harvard has taken to address it.
   
• The legal reckoning for Donald Trump entered a critical stretch Tuesday as a Washington federal appeals court signaled it would reject the former president’s claim that he is immune from prosecution on charges he plotted to overturn the 2020 election.

As retailers cite rising theft and shrinkage, analysts want more details.

As retailers, in the coming weeks, report on the busy holiday shopping season, investors and analysts will be trying to get more understanding into shrinkage and theft.

The "shrinkage" debate. Finance executives say they are fighting a growing wave of theft, cutting into profits that were already under pressure. But theft is just one contributor to shrink, the industry term for the difference between inventory on the books and what’s physically on hand.

Lost or damaged goods and inaccurate records also play a part. The picture of retail shrink, which retailers say has been accelerating, may also have been distorted by effects of the pandemic and inflation, some analysts say.

America has plenty of natural gas. So why is New England left out in the cold?

America is the world’s largest natural-gas producer, but New Englanders’ capacity to stay warm in winter may hinge on the fate of an expensive, 53-year-old import plant that its owner has threatened to shut down.

Uneven distribution. The situation with the Everett Marine Terminal owned by Constellation Energy shows that despite 25 years since the first shale well was fracked in Texas, the benefits of the American drilling boom remain unevenly distributed. Swaths of the country are flooded with cheap gas, and export facilities have cropped up to sell the excess overseas. Other areas, including New England, are bereft of fuel and pay up for energy.

• Under President Emmanuel Macron, France's relationship with former colonies has grown increasingly turbulent, upending French and U.S. efforts to fight terrorism.
   
• China’s overseas auto sales surged to a record last year, with the country on track to surpass Japan as the world’s biggest car exporter and marking a tectonic shift for the global industry.
   
• The global economy managed to weather the effects of inflation and geopolitical tensions better than expected last year, but don’t look for a strong recovery this year, the World Bank said Tuesday.
   
• Eurozone unemployment has fallen to match a record low set a few months earlier, new data showed.
   
• An Israeli delegation arrived in Cairo in an effort to revive hostage talks, Egyptian officials said, as Secretary of State Antony Blinken held meetings in Israel aimed at preventing the war in Gaza from escalating into a regional conflict.
   
• Boeing CEO David Calhoun said the company needs to acknowledge its mistake as the aircraft maker reels from a door-plug failure that has resulted in roughly 170 of its planes being grounded and spooked its customers.

New York state plans to give some cities free cyber tools.

New York state will provide select cities in most counties with free cybersecurity tools, Gov. Kathy Hochul said in her annual State of the State agenda Tuesday.

The two largest municipalities in each New York county, except for those comprising New York City, will be given access to cybersecurity technology from CrowdStrike Holdings free of charge, she said.

• Defense Secretary Lloyd Austin is being treated for complications due to prostate cancer, an ailment that President Biden only learned about on Tuesday, eight days after the Pentagon chief was rushed to the hospital, officials said.
   
• Palestinians are fleeing into an ever-shrinking section of the Gaza Strip as Israel’s offensive enters its fourth month and its military asks the enclave’s residents to leave more areas it says are unsafe.
   
• Fulton County District Attorney Fani Willis has been subpoenaed to testify in a colleague’s divorce proceeding, according to a court filing, a development that could shed light on claims Willis and the colleague carried out an improper romantic relationship as they prosecuted former President Donald Trump and others.
   
• Lawyers say recent securities-fraud cases have a new twist: they are the product of the daily humdrum of two adults doing their jobs remotely.
   
• NASA delayed two astronaut missions to the moon, citing technical challenges that have emerged with everything from a spacecraft to new spacesuits.

Follow us on X at @WSJRisk. Follow Risk & Compliance editor David Smagalla @DSmagalla_DJ and reporters Mengqi Sun @_MengqiSun, Dylan Tokar @dgtokar and Richard Vanderford @VanderfordRich.

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