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Daily Mail
02-05-2025
- Business
- Daily Mail
California official's insane spending spree with insurance execs at the state's fanciest restaurants while LA burned
California 's insurance commissioner was wined and dined by an insurance boss at one of Los Angeles ' fanciest restaurants as the city burned beneath them. Entire communities spent weeks on edge in January, evacuated from their homes and hunkering down in shelters or with loved ones, unsure if their homes had been razed during unrelenting wildfires which killed 30 and destroyed unimaginable swathes of land. The perverse reality was that the 'lucky ones' were those wracked with fear about whether their insurers would ever pay out for any damage they faced. Others were part of the unfortunate cluster whose insurance premiums had spiked to such extortionate levels that they'd had to cancel their policies, or had simply been told one day by their provider that they were no longer covered. Meanwhile the man tasked with holding insurance firms to account, Ricardo Lara, was feasting on sea urchin, lobster salpicón, a rack of lamb and two bottles of Leirana Albariño with Raul Vargas, CEO of the Farmers Insurance Group. On January 15, the pair had a table at San Laurel, the brainchild of famed chef José Andrés which boasts glittering and sprawling views of Los Angeles. That same day, first responders were combing through the devastation of the Palisades fire searching for the charred remains of residents in the wreckage, while firefighters were still battling to get the Eaton fire under control. An investigation by the San Francisco Standard accuses Lara of blowing $30,000 of money allocated to his campaign on fancy restaurants and wining and dining. During the January 15 dinner, the total bill came to $697, including tip. On that occasion, Lara paid $234 of the bill, charging it to a campaign committee balance created two years prior to fund a run for lieutenant governor which never materialized. The rest of the tab was picked up by Vargas, whose company is California's second largest home insurer. Throughout his term, Lara has been repeatedly accused of cozying up to the insurance industry which he is mandated to police. As part of his elected role, Lara sets rates in California and is responsible for ensuring a healthy and competitive insurance market. California is gripped by an insurance crisis as insurers increasingly turn their backs on areas they now deem high risk for wildfires and natural disasters. From 2020 to 2022, insurance companies chose not to renew 2.8million policies f or homeowners across the state. This included 531,000 in Los Angeles County, which was decimated by the wildfires. Just months after he took office in 2019, he was forced to issue an apology after it emerged he had taken tens of thousands of dollars in campaign donations from parties with interests in the insurance sphere. He said he was 'deeply sorry' for his actions and vowed to no longer engage with the industry for support. In addition to his latest dinner, last year Lara charged two meal bills at swanky Italian restaurant Piatti to his campaign fund. One of the checks, from April 17 2024, was for more than $1,000. He described the dinner as a 'campaign strategy meeting' with eight diners. Between them, they ordered seven cocktails, eight glasses of wine, a bottle of Honis sauvignon blanc and almost half the food items on the dinner menu, including steaks, meatballs, olives and various desserts. And in 2023, he held four separate meetings at Baar Baar, a ritzy Indian restaurant in Los Angeles. On one of these visits, he and unnamed guests dined over a bottle of Cobb riesling, two more glasses of wine, lamb keema hyderabadi, shrimp ghee roast, and beef short ribs. Meanwhile on another, he and a guest ordered three Slumdog Millionaire cocktails, along with other drinks. Consumer Watchdog advocacy group executive director Carmen Balber told the publication Lara's dinner with Vargas was 'disappointing' given his earlier apology. 'It sounds like he's mixing regulation and politics once more. Maybe ''shocker'' is the wrong word, but it's disappointing. And if this wasn't a campaign meeting, then what is this campaign committee? Nothing more than a slush fund.' Beyond the fancy restaurants, Lara is also facing intense criticism for his travel schedule and for policies which are set to benefit insurers and drive up premiums by up to 50 percent. The first Senate committee hearing on insurance in the wake of the fires was held on March 12, 2025. Lara did not attend, according to an investigation conducted by ABC. Instead, he traveled to Bermuda to attend a conference where he delivered a 15-minute speech. The Senate Insurance Committee holds between two and three crucial hearings a year, and the report determined that in his six year term so far, Lara has missed several to travel interstate or internationally. A spokesperson for his office countered the criticism, insisting: 'Commissioner Lara's job is to ensure that California consumers have real choices - not just last resorts. 'This involves going over the heads of insurance companies and engaging directly with the global reinsurance groups that support them. Nearly 40% of the world's reinsurance companies are based in Bermuda, paying out trillions of dollars in claims - including those for wildfires.' 'He is working to retain insurance companies in the market and attract those that have left.'
The Guardian
13-02-2025
- Business
- The Guardian
California insurance plan asks private insurers for $1bn after wildfires
California's home-insurance safety net does not have enough money to pay all of the claims from damage caused by the Los Angeles wildfires and has asked private insurers to contribute $1bn toward those claims. All private insurers operating in California are required to contribute to the Fair plan, a plan of last resort established so all Californians would have access to fire insurance. More than 450,000 California homeowners got their insurance through the Fair plan in 2024 – more than double the number in 2020. As of 4 February, the plan had received more than 4,700 claims from the Palisades and Eaton fires, almost half of which were for 'total losses'. But, at a time when property insurers have already begun leaving the state, the record assessment may trigger insurers to stop doing business entirely in California. Although recovery efforts are still under way, the Los Angeles wildfires may have been the costliest disaster in California history, with estimated economic losses as high as $57bn. 'We must take action to improve the financial standing of the FAIR Plan and prevent this situation from recurring,' Ricardo Lara, California's insurance commissioner, said in a press release. The assessment is the first time since the 1994 Northridge earthquake that the plan has called on private insurers to contribute additional funds to pay out claims. The $1bn assessment will be carried by private insurers, according to their market share. In 2023, California's largest insurers included State Farm, Farmers Insurance Group and CSAA Insurance, according to Moody's, a credit rating service. Insurance companies are responsible for half of that assessment, according to the state's insurance department, but may pass off the other half to customers as a temporary supplemental fee. The assessment cannot be passed off in future rate hikes. Companies must pay their share of the assessment within 30 days – meaning that immediately leaving the state would not prevent them from having to contribute to claims. However, some insurers are already evaluating whether the cost of doing business in California is too high in the era of climate change. In 2023, both State Farm and Allstate said they would no longer provide new coverage in the state. In December 2024, State Farm decided not to renew fire insurance policies for about 1,626 customers in the Pacific Palisades – representing about 70% of its market share in the neighborhood. Some of those customers turned to the Fair plan, while others went uninsured. In response, Lara announced a new regulation, requiring insurers to issue policies in fire-prone areas to continue doing business in the state. In mid-January, after the fires began, State Farm offered to renew many of the policies it had planned not to renew. Last week, State Farm filed a request for an emergency rate increase of 22%, claiming the fires had put the company under increased financial strain. To respond to California's growing insurance crisis, Lara says, state lawmakers must consider legislation 'that would allow the FAIR Plan to access credit lines and catastrophe bonds to help pay claims in worst-case scenarios'. Some Angelenos have voiced another solution: litigation and policies that could force big oil to pay for the damage, citing the role of the industry in exacerbating climate change. 'They must take responsibility for the harm that they've caused, pay reparations to the affected communities who lost their homes and businesses, and take immediate steps to mitigate further damage,' Sam James, who lost her grandfather's home in the Eaton fire, said last month. 'It should not continuously fall on us to address the consequences of big oil's negligence.'
New York Times
11-02-2025
- Business
- New York Times
California's High-Risk Insurer Gets $1 Billion Bailout After L.A. Fires
California's home insurance plan of last resort, designed for people who can't get coverage on the private market, does not have enough money to pay claims from the Los Angeles wildfires and is getting an infusion of cash from regular insurers. State regulators said Tuesday that they will allow the program, known as the FAIR Plan, to collect $1 billion from private insurance companies doing business in California to pay its claims. That is likely to drive up insurance costs for homeowners across the state. The situation marks a perilous new stage for California's home insurance market, which had already been reeling from wildfires made more frequent and intense by climate change. Facing growing losses, major insurers like State Farm were already pulling back from the state, making it harder for homeowners to find coverage. Now the pressure to leave will be even greater. The $1 billion assessment is the largest since the FAIR Plan was created in 1968, and the first time since the 1994 Northridge earthquake near Los Angeles that the FAIR Plan has faced claims it can't pay on its own. The fee will be divided among insurers based on their market share, as required by state law. 'The number one priority right now is that the FAIR Plan pay out its claims,' Ricardo Lara, California's insurance commissioner, said in an interview. 'The FAIR Plan, the way we've set it up, is doing what it's supposed to.' As of 2023, the state's largest insurers by market share were State Farm, Farmers Insurance Group and CSAA Insurance, according to data from AM Best, a company that rates the financial strength of insurers. Other major insurers in the top 10 included Liberty Mutual, Allstate and Travelers. State regulations allow insurers to pass along as much as half the cost of the assessment to customers, in the former of higher charges. Insurers must absorb the other half. 'They're supposed to eat that through their profits,' Mr. Lara said. 'Consumers cannot shoulder 100 percent of this cost.' Those companies could face bills from the FAIR Plan assessment in the tens of millions of dollars or more — and by state law, they must pay within 30 days. Leaving California would not relieve insurers of their share of the assessment for the FAIR Plan. But they might conclude that continuing to write home insurance policies in the state has become too risky. The problems facing insurers in California did not start with last month's wildfires in Los Angeles. Fires in 2017 and 2018 wiped out a quarter-century of profits for insurers, leading many carriers to reduce the number of homeowners they covered. Making the problem worse was the fact that California regulators have historically made it difficult for insurers to raise their premiums. Still, the Los Angeles fires made insurers' financial position even more tenuous. Last week State Farm asked state regulators for an urgent 22 percent rate increase, which it said was necessary 'to help avert a dire situation for our customers and the insurance market in the state of California.' Mr. Lara's office said he is still reviewing the request. As private insurers reduce their business in California, more homeowners are being pushed into the FAIR Plan, which was designed as a plan of last resort but is increasingly covering more and more homeowners. Between 2020 and 2024, the number of homes with policies under the FAIR Plan more than doubled to almost half a million properties with a value of about half a trillion dollars. Many of those homes were in the area devastated by the Palisades fire. As of Feb. 4, the plan had received more than 3,400 claims from the Palisades fire, and more than 1,300 claims from the Eaton fire. About 45 percent of those claims were for 'total losses' — homes that were completely destroyed. As wildfires get worse, a vicious cycle is emerging: More insurers leave, pushing more homeowners toward the FAIR Plan, which is less able to cover claims after the next disaster, leading to more assessments on regular insurers, pushing them out of the state even faster. Mr. Lara is trying to break that downward cycle. In December, he introduced changes that would allow insurers to charge higher premiums in exchange for covering more homes in high-risk areas. That would take pressure off the FAIR Plan and reduce the incentive for private insurers to leave the state, he said. Mr. Lara said other changes are needed, including giving the FAIR Plan the ability to borrow money through bonds or a line of credit. That way, if future wildfires produce claims that the plan can't cover, it wouldn't necessarily need another assessment. That proposal has support from the insurance industry. 'The state must explore a diverse range of funding solutions,' Mark Sektnan, a vice president for the American Property Casualty Insurance Association, said in a statement. He also said that state regulators must allow the FAIR Plan to charge higher premiums. But the change can't come from the insurance sector alone, Mr. Lara said. Officials need to tighten the rules around how and where people construct homes and infrastructure, he said, so that communities suffer less damage from future fires. 'The responsibility now is on local governments to build better,' Mr. Lara said.
