California Politicians Now Want Oil Companies, Not Insurers, To Subsidize People Living in Wildfire Zones
For decades, California’s byzantine insurance regulations effectively forced insurers to subsidize people living in wildfire-prone areas.
With the recent devastating wildfires in Los Angeles exposing the state’s already in-crisis property insurance industry to tens of billions in losses, lawmakers are now proposing to shift the cost of that subsidy onto oil companies.
Earlier this week California lawmakers introduced Senate Bill (S.B.) 222, which would allow individuals, private insurers, and the state-run insurance plan to sue oil companies for damages they suffer from “climate disasters and extreme weather events.”
“By forcing the fossil fuel companies driving the climate crisis to pay their fair share, we can help stabilize our insurance market and make the victims of climate disasters whole,” said California Sen. Scott Wiener (D–San Francisco), one of the bill’s authors, in a press release.
Early estimates peg the economic damage of fires at $250 billion. Insurers’ losses could be as high as $45 billion.
California’s state-administered FAIR Plan, a property insurer of last resort, has just $337 million in reserves and is exposed to an estimated $6 billion in losses from the recent fires.
FAIR will raise that money via a special assessment on private insurers, who can then pass the costs onto individual policyholders. Private insurers are themselves asking for rate increases of as much as 50 percent in response to the fires.
By shifting financial liabilities for the wildfires from insurers and insured onto oil companies, S.B. 222 could spare individual insurance policyholders from what’s sure to be a politically unpopular double whammy of a special FAIR assessment and hiked premiums.
The bill is “a twist on preexisting California law that allows insurers to collect from public utilities if there’s any nexus between wildfire and utility lines,” says Ray Lehman, a senior fellow at the International Center for Law and Economics.
One distinction is that a utility company’s downed power line or sparking transformer can be (and has been) a direct cause of a destructive fire.
In contrast, emissions from oil companies (and their customers) are not the direct cause of any wildfires. They are
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