From Yahoo Finance: 2025-06-08 10:00:00

Hedge funds are under scrutiny in California for their involvement in subrogation claims related to the Los Angeles wildfires, with the California Earthquake Authority calling the transactions unethical and profit-driven. The authority plans to take action against hedge funds seeking to profit from the devastating wildfires, potentially blocking payouts worth billions of dollars. Despite lower prices, transactions continue, with deals worth over $1 billion executed by Oppenheimer & Co. Inc. and Cherokee Acquisition.

Insurers are increasingly turning to recovery subrogation in the secondary market to manage the rising costs of weather-related catastrophes, with alternative asset managers playing a crucial role. Efforts to prevent investors from profiting from subrogation claims they’ve bought are seen as politically motivated by some, with the California Wildfire Fund potentially impacted. The fund, capitalized by utilities, faces exposure due to the January fires, expected to be the costliest in US history with insured losses estimated at $45 billion.

The market for subrogation claims is characterized by opaque over-the-counter deals, with hedge funds betting on recovering more than they paid for the claims. The California Wildfire Fund, set up in 2019 to help reimburse claims from wildfires caused by utilities, could end up paying out to hedge funds if they prevail in their claims. The Earthquake Authority and Catastrophe Response Council are reviewing claims and procedures as they navigate the complex situation with potentially significant financial implications.



Read more at Yahoo Finance: Hedge Funds Face California Rebuke Over Role in Wildfire Claims