Insurance companies retreated from California while investing billions in fossil fuels

Good morning. Here’s what you need to know to start your day.

• Insurance companies know the risks of climate change. So why have they invested more than half a trillion dollars in fossil fuels?
• A second round of rain is heading to L.A. What will it take to end fire season?
• 18 of the best spots in L.A. for wings on Super Bowl Sunday.
• And here’s today’s e-newspaper.

Investing in an ‘existential threat’

The Palisades and Eaton fires will likely go down as the most economically costly disaster in state history — and among the costliest in U.S. history.

The historic destruction arrived after major insurance companies announced they would stop writing new policies in the Golden State, citing in part the increasing risk of devastating wildfires.

The retreat indicates that insurers are responding to what scientists have been telling us: Human-caused climate change is intensifying wildfires, rainstorms and other weather events. And that climate change is being driven primarily by our continued burning of fossil fuels.

But insurance experts, consumer advocates and environmental groups accuse insurance companies of perpetuating the climate crisis by continuing to invest hundreds of billions in the fossil fuel industry.

A burned car and home in Altadena after the Eaton fire.

(Allen J. Schaben / Los Angeles Times)

With the fires fresh in many Californians’ minds, they’re renewing calls for insurers to get their money out of the polluting industry that’s fueling disasters.

How much money do insurance companies have in fossil fuels?

More than half a trillion dollars as of 2019, according to a 2023 study led by the nonprofit Ceres.

Researchers analyzed data provided by property and casualty companies and life insurance groups and found that top 16 insurers in the U.S. “held approximately 50% of the over $500 billion dollars in fossil fuel-related assets owned by the sector. “

Among property insurers, State Farm and Berkshire Hathaway had the most money invested by orders of magnitude — $30.9 billion and $20.9 billion, respectively.

It’s not just investing. Insurers are also underwriting fossil fuel projects, which researchers argue “helps greenhouse gas-intensive industries continue operations contributing to global warming.”

A firefighter battles a house fire off Bollinger Drive in Pacific Palisades.

(Wally Skalij / Los Angeles Times)

California was instrumental in shedding light on U.S. insurers’ investments.

Back in 2016, Dave Jones, the former California insurance commissioner who now leads UC Berkeley’s Climate Risk Initiative, launched the Climate Risk Carbon Initiative, which required large insurance companies to disclose their investments in the fossil fuel sector.

Jones also asked insurers operating in the state to voluntarily divest from coal, writing in a statement that “investments in coal and the carbon economy run the risk of becoming a stranded asset of diminishing value.”

The following June, Jones received a letter from 12 attorneys general and a governor in Republican-led states. They threatened legal action if Jones did not end his initiative, accusing him of harming energy companies and insurers that operate in their states with “public shaming.”

Jones wrote back, telling those state officials that he was “not deterred by your threats.”

“Although it is politically popular in your states to deny or ignore climate change, ignoring the potential financial risks to insurer investments from climate change is irresponsible and even reckless,” his letter states.

“I said, ‘but if you want to sue me, bring it on,’” Jones recounted. “They didn’t sue.”

A person holds a hose to a smoldering house as he tries to prevent its spread during the Eaton fire.

(Robert Gauthier / Los Angeles Times)

The data collected from Jones’ request was made publicly available on his department’s website. Ceres later analyzed the assets reported by insurers in 2019, presenting them in their 2023 report.

For Jones, the industry’s involvement in fossil fuels is a nonsensical conflict of interest.

“We know that it’s the fossil fuel industry’s emissions that are the primary driver of climate change that’s [contributing to] these catastrophic weather-related events, that’s causing insurers to have to jack up rates and or stop writing insurance — it makes no sense,” he said. “Basically, insurers are investing a half a trillion dollars in the industry that is posing an existential threat to their ability to write insurance.”

State Farm, Berkshire Hathaway and Allstate did not respond to requests for comment.

What can lawmakers (and policyholders) do?

Jones, along with consumer advocacy and environmental groups, have been urging states to challenge the insurance industry through new laws that would require them to transition away from fossil fuel investments.

Carmen Balber, executive director of L.A.-based Consumer Watchdog, said her group has been asking current California Insurance Commissioner Ricardo Lara to resume his predecessor Jones’ initiative and require insurance companies to report their fossil fuel investments again. Lara previously denied that request.

“Insurance companies are passing all the costs of climate change onto policyholder … but keeping all the profits,” she told me. “If climate change is making insurance losses worse — and there is no question that they are — the insurance industry should not be contributing to that problem.”

The first step, Balber said, would be a transparent process so property owners could see how much money the companies that write (or don’t write) their policies are investing in or making off fossil fuels.

If the public was better aware of that, she argued, people could vote with their pocketbooks by opting to purchase insurance from firms that have committed to divest from fossil fuels.

“That list is not available, unfortunately, because we don’t have those kinds of commitments,” she said.

There was an attempt at federal legislation, via a 2023 bill co-authored by then-Rep. Adam Schiff. It would have required major insurance companies to disclose all their investments and underwriting related to fossil fuels.

“Insurance companies like State Farm and Allstate shouldn’t be allowed to profit from the climate crisis while neglecting vulnerable communities,” Schiff wrote in a statement at the time. “Requiring insurers to publicly disclose their fossil fuel investments will help build transparency and empower people to make informed choices about their coverage.”

That bill died in a House committee later that year.

Today’s top stories

The Palisades fire approaches the ocean along Pacific Coast Highway on Jan. 8.

(Wally Skalij/Los Angeles Times)

L.A. fires’ impact on the environment

• People who lost their homes are being told it’s safe to return and try to salvage what’s left — but experts say the wildfire waste is probably teeming with hazardous materials.
• Toxins may have reached parts of L.A. outside the immediate fire zones; it may take years before we know the full impact on public health.
• The charred and toxic remnants of thousands of destroyed homes, businesses, cars and electronics will eventually come to rest in the ocean.

What — or who— started the Palisades fire?

• Officials believe the Palisades fire began in the Highlands neighborhood of Pacific Palisades near a popular hiking trail.
• Sources said there are two leading theories: An 8-acre blaze that fire officials thought they had put out on Jan. 1 in the same area reignited and spread because of intense winds, or a new fire was somehow sparked nearby that morning.
• Sources have also told The Times the blaze appears to have human origins.

Multiple people were killed in a D.C. plane crash

• A midair collision between an Army helicopter and an American Airlines flight killed all 67 people aboard the two aircraft in the nation’s worst air disaster in a generation.
• Air crash investigations can take months, and federal investigators told reporters they would not speculate on what caused the collision.
• Fatal crashes of commercial aircraft in the U.S. have become a rarity. The deadliest recent crash was in 2009 near Buffalo, N.Y.

What else is going on

• If you lost your job because of the Los Angeles fires, here are a few options.
• As Trump cuts federal jobs, even national parks are on the chopping block.
• A second round of rain is heading to L.A. What will it take to end fire season?
• Cal State University, reeling from budget cuts to classes and faculty, decry more proposed state reductions.
• These House newcomers came to the Capitol with big plans. Then the wildfires hit.
• Trump’s orders have upended U.S. immigration. What legal routes remain?
• Women who’ve accused Russell Simmons of sexual assault allege the mogul owes them nearly $8 million.
• 50 Cent apparently finds it hilarious that Gloria Allred’s client is suing him for alleged assault.
• Grammys 2025 predictions: Who will win, who should win, and the Beyoncé of it all.
• Everything that happened at the FireAid benefit: From Stevie Nicks’ thank you to Lady Gaga’s hopeful closer.

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Commentary and opinions

• Are we asking the right questions about Hilaria Baldwin? Guest columnist Alex Zaragoza writes about what the notorious, allegedly fake Spaniard can teach us about the language and culture we as Latinos value.
• A drinking bot helped end my 3-glasses-of-wine a day habit. Then I started to tell it lies, guest columnist Frances Dinkelspiel writes.
• Yes, the Panama Canal was built at a dear price — paid in Black lives, guest columnist Joan Flores-Villalobos writes.
• Forget ‘Emilia Pérez.’ Its parody, ‘Johanne Sacreblu,’ is the real work of art, writes columnist JP Brammer.

This morning’s must reads

Dr. Pascal Dabel, with son Lucien, 3, and Marina Martos Dabel, with son Lorenzo, 7, added a two-story accessory dwelling unit to their Silver Lake home that functions as an extension of their yard in addition to housing for family and friends. Eventually, the couple plans to rent the ADU.

(Genaro Molina/Los Angeles Times)

A Los Angeles ADU is inspired by West African textiles and a fresh take on modernism. This two-story accessory dwelling unit in Silver Lake is fresh, fun, playful and sophisticated. The chic textile-inspired ADU was originally designed to be a rental. At the moment, it’s housing friends unable to return home following the Eaton fire.

Other must reads

• What to learn from rebuilding of Paradise after 2018 wildfire? Plenty, says top insurance executive.
• Deputies raced to evacuate Altadena residents, wondering if their station would burn, too.

How can we make this newsletter more useful? Send comments to [email protected].

For your downtime

Korean fried chicken options at Chimmelier include galbi soy garlic bone-in chicken wings and “K-tenders” coated in a signature dry rub alongside dipping sauces.

(Jason Armond/Los Angeles Times)

Going out

• 😋🏈18 of the best spots in L.A. for wings on Super Bowl Sunday.
• 💸😮‍💨Funds, free bongs and a place to puff: how the cannabis crowd is helping fire victims.

Staying in

• 📺‘Mo’ goes from Mexican border to the West Bank in Season 2 now streaming on Netflix.
• 🥟Here’s a recipe for golden bag chicken dumplings with Thai sweet chili sauce.
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And finally ... your photo of the day

Show us your favorite place in California! Send us photos you have taken of spots in California that are special — natural or human-made — and tell us why they’re important to you.

Sunrise at the Alfaro Family Vineyards in Watsonville, where Ryan Alfaro produces his Farm Cottage wines. The site is ideal for producing Pinot Noir with beautiful fruit and natural acidity.

(Tomas Ovalle/For The Times)

Today’s great photo is from Times contributor Tomas Ovalle at the Alfaro Family Vineyards where a new generation of winemakers is leading a revolution that’s helping to redefine California wine.

Have a great day, from the Essential California team

Ryan Fonseca, reporter
Defne Karabatur, fellow
Andrew Campa, Sunday reporter
Kevinisha Walker, multiplatform editor
Hunter Clauss, multiplatform editor
Christian Orozco, assistant editor
Stephanie Chavez, deputy metro editor
Karim Doumar, head of newsletters

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