Good morning. Climate-related risks are becoming an increasing challenge for insurers, the U.S. Treasury Department said, urging state regulators to step up their so-far “limited” efforts to address the issue.

• More needed from states: Insurers face a host of risks, from increased litigation to reputational harm, associated with climate change, but the response from regulators remains in its early stages, the Treasury Department’s Federal Insurance Office said in a report published Tuesday.
   
• Why the focus now? Insurance in the U.S. is regulated at the state level, an approach that has led to a fragmented policy landscape nationwide. In addition, more frequent severe weather events have made insurers’ climate-related policies a bread-and-butter issue for households across the country. 
   
• Impact of climate change: After adjusting for inflation, eight of the 10 costliest U.S. wildfires have occurred since 2017, according to the FIO. The U.S. in 2022 saw 18 climate-related disasters that cost more than $1 billion each, the office said. State Farm recently stopped issuing new home insurance policies altogether in California, in reaction to wildfire risk and construction cost inflation. Allstate also paused the issuance of new policies in the state.
   
• What's FIO's role? Though the FIO can’t force states to adopt its recommendations, it has an oversight role. The office urged state regulators to push insurers to expand their focus and look at the longer time horizon associated with climate-related risks.

U.S. sanctions Wagner’s gold and diamond mining operations.

The U.S. government imposed sanctions Tuesday on the gold and diamond operations of the paramilitary group Wagner in an attempt to undercut the funding of the Russian organization that has dispatched tens of thousands of soldiers to the war in Ukraine.

The sanctions target four companies that operate in the Central African Republic, the United Arab Emirates, Mali and Russia and are connected to the group’s founder and owner, Yevgeny Prigozhin.

U.S. Treasury officials had long planned to enact the sanctions, according to a State Department official, but hesitated briefly to avoid taking sides in the short-lived mutiny that resulted in a break between Russian President Vladimir Putin and Prigozhin.

• Blame Swirls in Putin’s Inner Circle Following Mutiny

Supreme Court gives state courts more power over corporate defendants.

The Supreme Court rejected a bid by Norfolk Southern to limit its state-court liability in states where it does relatively little business, ruling Tuesday that states can require companies to submit to their courts’ jurisdiction as a condition of doing business within their borders.

While the case involved a long-pending workplace lawsuit filed by a retired railway employee from Virginia, Justice Neil Gorsuch, writing for a 5-4 majority of the justices, linked the issue to a Norfolk Southern train’s Feb. 3 derailment in East Palestine, Ohio.

• New York federal judge on Tuesday denied FTX founder Sam Bankman-Fried’s request to dismiss most of the criminal charges he faces over the collapse of the crypto exchange, setting the stage for him to go to trial in October.
   
• The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of U.S. rivals, according to people familiar with the situation.
   
• Starbucks told employees it plans to issue clearer guidelines around in-store decorations following controversy over Pride decorations, which has led to strikes at some cafes this week.
   
• Florida Gov. Ron DeSantis on Monday asked a federal judge to toss out Walt Disney Co.’s lawsuit against him and another state official, arguing the company lacks standing to sue them.
   
• A small brokerage firm thinks it has a blueprint to bring crypto trading into the regulated market, using an exemption that U.S. regulators created 50 years ago to permit trading of shares that were restricted.

U.S. to send its biggest sub to Korean peninsula in message to North and South.

The U.S. plans to send its largest nuclear-armed submarine to South Korea for the first time in four decades, in an effort to deter North Korea and reassure American allies in Seoul.

Bringing the massive submarine to the Korean Peninsula is intended to rattle the regime of Kim Jong Un. But the visit carries just as much—if not more—significance for South Korea.

AI promised to make jobs easier. Workers weren’t so sure.

Companies for years have been building artificial-intelligence algorithms designed in part to make the jobs of front-line staff easier and more efficient—but they often find that workers don’t like, trust or use the tools.

The algorithms have a number of goals, including making employees’ jobs easier, saving on costs and getting more done in a shorter amount of time. But in each case, companies are confronting workers who have their own expertise and routines with AI recommendations that aren’t always 100% accurate. And it is causing friction.

• When energy prices rose following Russia’s invasion of Ukraine, Australia adopted a tactic the U.S. hasn’t used in decades: It capped natural-gas prices. The strategy appeared to work, but critics worry a precedent has been set and warn that interfering with market forces risks choking investment in new natural-gas supply.
   
• Russia is on the cusp of overtaking Saudi Arabia as the biggest oil supplier to China, in a shift that shows the limits of the kingdom’s influence over global markets that have been turned upside down by the Ukraine war.
   
• European Central Bank President Christine Lagarde said the bank would likely raise interest rates in July and keep them high for some time, signaling that the ECB still has a way to go to tame high inflation.
   
• Five cases of malaria have been identified in the U.S., marking the first time since 2003 that the disease has been acquired within the country, federal health officials said.
   
• The Biden administration is considering new restrictions on exports of artificial intelligence chips to China, as concerns rise over the power of the technology in the hands of U.S. rivals, according to people familiar with the situation.

• The Supreme Court rejected a Republican-led challenge that would have allowed state legislatures to expand their power over federal elections unchecked by state courts or constitutions.
   
• The Wagner mutiny shows a military quagmire threatens Moscow’s strongman leader as well.
   
• Home prices posted their first year-over-year price decline in 11 years in April, as higher mortgage rates made home purchases more expensive for buyers.
   
• Oil and gas companies would need to spend just a small fraction of their earnings on minimizing methane releases to have an outsize impact on curbing climate-altering greenhouse-gas emissions, but action has been lacking, the International Energy Agency said Tuesday.
   
• The Treasury Department erred in giving a loan to a troubled trucking company as part of a 2020 Covid-19 rescue package and should refrain from similar sector-specific loan programs in the future, according to a new congressional report.
   
• Companies are rolling out special paid time off for new grandparents, hoping the move will keep older workers from retiring or moving to another employer.
   
• Southern, one of the largest utility companies in the U.S., has been bedeviled for much of the past year by a peculiar espionage effort, which led to an internal investigation but no public explanation.

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