Politics
How Wall Street hedge funds are gambling millions on Eaton fire insurance claims
In a high-stakes gamble, Wall Street hedge funds are offering to buy claims that insurers may have against Southern California Edison if the utility is found liable for causing the devastating Eaton fire in Altadena.
The solicitations are legal, but have alarmed California state officials — who loathe the idea of investors profiting from a disaster that claimed 18 lives and destroyed more than 9,400 homes and other structures.
“I think everyone in this room looks at a catastrophe, like what happened in Southern California, and our natural instincts are to say, ‘What can we do to help?’” Tom Welsh, the chief executive of the California Earthquake Authority, which manages the state’s wildfire fund, said at a recent public meeting. “There are other actors in the environment who look at that situation in Southern California and ask instead, “What can I do to profit?’”
The investors are aiming to buy so-called subrogation claims from insurance companies. These are claims that insurers would file against Edison seeking reimbursement for the money they paid to their policyholders for fire damages if it’s determined the utility’s equipment triggered the wildfire that began Jan. 7.
For the insurers, selling the claims — even at a steep discount — allows them to get at least some reimbursement for the money they’ve paid out. For the hedge funds buying the claims, it’s a gamble that could pay big if Edison is found liable and they can cash in those claims for much more than they paid.
More than $17 billion in insurance claims for the Eaton and Palisades fires has been paid out so far, according to the California Department of Insurance.
State officials say California has a stake in the trading of fire-related subrogation claims, which was previously reported by Bloomberg, because of the potential effect on the state’s wildfire fund.
That fund, which currently has about $21 billion, would be used to cover most of the costs of damage claims should Edison be found liable for starting the Eaton blaze. While the cause is still under investigation, a leading theory is that a decommissioned transmission line in Eaton Canyon was reenergized and sparked the blaze, Edison has said.
The wildfire fund is managed by a state board called the Catastrophe Response Council. At its last meeting in May, Welsh told the board that solicitations from New York brokers and investment firms began landing in his email inbox in March.
Ronald Ryder at Oppenheimer & Co., a New York investment firm, told Welsh in an email on April 15 that his company was currently trading the subrogation claims. Ryder wrote that there had already been 10 transactions worth more than $1 billion in recovery rights for the Eaton fire as well as the Palisades fire in Pacific Palisades, where the city of Los Angeles faces potential liability.
In another email, Ryder told Welsh that investors were bidding 47 cents on the dollar for the claims related to the Eaton fire. For the Palisades fire, the bidding was 5 cents on the dollar, Ryder wrote.
Welsh warned the council that “speculative investors” might hold onto the Eaton claims and “really try to get outsized profits by demanding settlements from Edison of 75, 80, 85 cents on the dollar.”
If that were to happen, the wildfire fund could pay out “hundreds of millions, if not billions of dollars” more than if the claims were settled directly by the insurers, he said.
“That would really, very negatively impact the durability of the wildfire fund,” Welsh said.
Oppenheimer declined to comment, and Ryder didn’t respond to messages.
Under a 2019 state law, the state wildfire fund would be expected to reimburse Edison for most of the insurers’ payments to policyholders if its electrical equipment is found to have started the Eaton fire. The Palisades fire, which occurred in territory serviced by the L.A. Department of Water and Power, isn’t covered by the state fund.
California lawmakers created the wildfire fund in 2019 to protect the state’s three biggest for-profit utilities — Edison, Pacific Gas & Electric and San Diego Gas & Electric — from bankruptcy if their equipment sparks catastrophic wildfires.
The possibility of large settlements paid out by the wildfire fund has led to dozens of lawsuits against Edison, even before the cause of the fire has been determined.
If found responsible for the fire, Edison would negotiate settlements with the insurers, as well as with homeowners and others who have filed lawsuits, saying they’ve been harmed. The utility would then ask the state wildfire fund to cover those amounts.
If the insurers have sold their claims, however, the investors who bought them would reap the returns. Attorneys who handle the complex transactions would also get a cut and “generally take a very high percentage off the top,” Paul Rosenstiel, a catastrophe council member, said at last month’s meeting.
Already, Gov. Gavin Newsom and other state leaders are worried that the $21-billion wildfire fund could be depleted by damage claims from the Eaton fire.
Welsh recounted how a hedge fund had profited in 2019 by buying insurers’ subrogation claims against PG&E after its transmission line was found to have started the 2018 Camp fire that killed 85 people and destroyed much of the town of Paradise. Bloomberg reported at the time that hedge fund Baupost Group made a profit of hundreds of millions of dollars by buying the claims at 35 cents on the dollar and later getting a settlement valued at much more.
To stop hedge funds from profiting on the claims, Welsh said, the earthquake authority is now considering changing its claim administration procedures to make the settlements less lucrative for those investors.
One possible change being discussed, according to authority staff, would require a utility that ignited a wildfire to prioritize settling the claims of victims and insurers who have not sold their subrogation rights before those claims owned by hedge funds.
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President Donald Trump said Tuesday he plans to lift U.S. sanctions on Turkey and signaled he is prepared to move forward with the long-stalled sale of F-35 stealth fighter jets, marking a dramatic reversal in U.S. policy toward the NATO ally years after Ankara was expelled from the program for its purchase of a Russian missile defense system.
Speaking alongside Turkish President Recep Tayyip Erdoğan during a bilateral meeting at the NATO summit in Ankara, Turkey, Tuesday, Trump said his administration would remove sanctions imposed on Turkey’s defense sector.
“I can tell you we’re going to be taking the sanctions off, OK?” Trump said. “I don’t want him to waste his time answering that question. It’s time. We don’t sanction friends.”
TRUMP BETS ON FORMER NATO TROUBLEMAKER AS TURKEY’S STRATEGIC VALUE SURGES
Turkish President Recep Tayyip Erdogan welcomes US President Donald Trump at Ankara Airport, who is paying an official visit to Turkey ahead of the 36th NATO Heads of State and Government Summit in Ankara, Turkey, on July 07, 2026. (Dogukan Keskinkilic/Pool via REUTERS)
Asked whether he would sell F-35 fighter jets to Turkey despite existing legal restrictions tied to Ankara’s purchase of the Russian-made S-400 air defense system, Trump indicated he was open to doing so.
“Many people, including the people sitting right here thinks why wouldn’t we do that?” Trump said. “Turkey has been in many ways much more loyal than other countries that we think would be loyal.”
Pressed on concerns about Turkey’s continued possession of the S-400, Trump dismissed them.
“I have no concerns about anything.”
The remarks represent Trump’s clearest indication yet that he intends to restore defense ties with Turkey, building on months of efforts to revive military cooperation with one of NATO’s largest armed forces after years of strained relations.
Turkey was removed from the multinational F-35 program in 2019 after taking delivery of the Russian-made S-400 air defense system, prompting Washington to argue that operating the Kremlin-built system alongside America’s most advanced stealth fighter could expose sensitive U.S. technology. Congress subsequently imposed sanctions under the Countering America’s Adversaries Through Sanctions Act, or CAATSA.
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Congress long has been one of the biggest obstacles to restoring Turkey’s access to the F-35, with bipartisan lawmakers arguing that Ankara should not receive America’s most advanced fighter aircraft while it continues to possess the Russian-made S-400 air defense system and pursues policies they say run counter to U.S. interests.
A U.S. airmen watches an Air Force F-35 Lightning II joint strike fighter aircraft approach for the first time on July 14, 2011 at Eglin Air Force Base in Florida. (Samuel King Jr./U.S. Air Force)
Beyond political opposition, the Trump administration also faces legal hurdles.
While the president has authority over sanctions policy, Congress enacted additional restrictions after Turkey’s purchase of the S-400. Section 1245 of the fiscal year 2020 National Defense Authorization Act bars the transfer of F-35 aircraft to Turkey unless the executive branch certifies that Ankara has met statutory requirements related to the Russian missile system.
In recent days, a bipartisan group of House lawmakers urged Trump not to move forward with an F-35 sale, arguing that doing so without satisfying those legal requirements would violate U.S. law and undermine national security.
Lawmakers also have warned that Turkey’s continued possession of the S-400, support for Hamas and tensions with fellow NATO allies Greece and Cyprus raise broader concerns about restoring Ankara’s access to the stealth fighter.
Russian S-400 missile air defence systems are seen before the military parade to commemorate the 75th anniversary of the battle of Stalingrad in World War Two, in the city of Volgograd, Russia February 2, 2018. REUTERS/Tatyana Maleyeva – UP1EE220T3A2B
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The Pentagon has maintained that the S-400’s sophisticated radar could collect data on the F-35’s radar signature and electronic profile during routine operations, potentially allowing Russia to better detect and defeat the aircraft in a future conflict if that information were shared with Moscow.
When the Trump administration removed Turkey from the F-35 program in 2019, the White House said “the F-35 cannot coexist with a Russian intelligence collection platform that will be used to learn about its advanced capabilities.”
Pentagon acquisition chief Ellen Lord similarly warned at the time that allowing Turkey to operate both systems would jeopardize the long-term security of the F-35 program because “much of the F-35’s strength lies in its stealth capabilities.”
SEATTLE — Is everybody happy now? You good, Mr. President?
Put our boys in a blender, President Trump did, with those phone calls to FIFA President Gianni Infantino. Messed with their mojo by politicking to get American striker Folarin Balogun’s red card rescinded.
We’ll have to check VAR, but it might be the first time Trump succeeded at having a decision overturned.
Probably because this time what he sought to overturn — discipline stemming from Balogun’s accidental contact in the United States’ victory over Bosnia and Herzegovina — actually was unjust. Balogun should not have received a red card.
The problem is, having our President butt in here was a joke. Unfunny and out of bounds, offsides, an own goal — all of the things.
It put the U.S. team at the center of a geopolitical maelstrom, which is exactly what they did not need in the hours before the biggest match of their lives and the biggest match in the history of the U.S. men’s soccer program.
Some 40 or 50 million viewers were expected to tune in; how many of them watched for the first time? And what sort of impression did Monday’s 4-1 blunder-filled meltdown against Belgium make? That we stink at soccer — still?
If you were one of them, please, believe your soccer-fan friends when they tell you the Americans played much better in previous matches.
But so much for a magical run. On their home turf, the Americans pulled up lame before the finish line (aka, for the U.S. team’s purposes, its first quarterfinals since 2002).
To their credit, after the debacle, members of the U.S. team didn’t complain about anything being rigged. They didn’t use the distraction as an excuse. And they didn’t point fingers at anyone — anyone at all.
U.S. striker Folarin Balogun (20) walks to the locker room at halftime against Belgium in the World Cup on Monday at Lumen Field in Seattle.
(Allen J. Schaben / Los Angeles Times)
“We’re playing on home soil,” defender Chris Richards said. “So the only pressure we put on ourselves is to perform for our country, and ultimately didn’t feel the way we wanted to today. But I don’t think the antics of the last 24 hours had anything to do with it.”
No, they said the “debate,” or “outside noise” or “political manipulation” — as Tim Ream, Alex Freeman and coach Mauricio Pochettino described what others are calling “Balogate” — were not to blame for the gut-punch that answered the question: Why not us?
Because the U.S. is not yet good enough to beat the world’s great teams. Especially not when their pregame preparation includes having to try to block out an international uproar.
To have any hope against the Belgians in the round of 16 — a matchup between FIFA’s Nos. 9- and 17-ranked sides — the Americans needed to be going full-tilt, to be focused and ferocious and probably also a little bit lucky.
Instead, they looked shook, rattled. And they got rolled.
They were the worst version of themselves at the worst time, which was so weird from a team that had been on its front foot from the first whistle against Paraguay.
Not Monday. Against Belgium, they were on their heels from the outset. Heavy touches, slow afoot, playing like they had the weight of the World Cup on their shoulders.
And all that White House maddening meddling — for what?
Balogun started and played most of the match, but it could just as well have been reserve striker Ricardo Pepi. Or you or me, Balogun was that ineffective.
His play of the day came postmatch, when he approached Belgian coach Rudi Garcia and the two had a respectful exchange. A real diplomat, that Brooklyn-born, Britain-raised American by birthright.
This loss was a real team effort, of course. Christian Pulisic came off in the 59th minute after twisting his right ankle — leaving this World Cup without a goal in the four matches he appeared.
Matt Freese, the Harvard-educated starting goalkeeper, had a brain cramp of epic proportions when he stepped outside of the box and failed to corral a ball. Belgium’s Charles De Ketelaere kicked it loose and set up Hans Vanaken, whose shot traveled behind Ream for an easy score that made it 3-1 in the 57th minute.
There was a lot of poor decision-making with this match, on and off the pitch.
In the end, Trump’s appeal to Infantino did more harm than good. But what if some good could come from it?
Hey, FIFA, what about giving teams a process to appeal cards, like our American athletes in the NBA, NFL and MLB have?
Offering a suggestion box wouldn’t be opening Pandora’s box, not if it were a transparent and regular part of the game that would, hopefully, offer increasingly fair outcomes in a tournament where every match is so monumental — as our President recognized, much too enthusiastically.
U.S. coach Mauricio Pochettino waves to the crown after a 4-1 loss to Belgium at the World Cup on Monday.
(Allen J. Schaben / Los Angeles Times)
Prosecutors on Monday began laying out their case against the man accused of murdering Charlie Kirk. It was the first day of a weeklong preliminary hearing that will determine whether or not there is enough evidence against the accused killer to stand trial.
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