Brokers trade insurer claims from Los Angeles wildfires

Wall Street brokers are now trading claims linked to the insurance losses from the recent wildfires in Los Angeles. These fires, which were extremely destructive, killed at least 29 people and damaged many neighborhoods. The claims may result in compensation from utility companies that are believed to be responsible for the fires. Investors are buying these claims, called subrogation claims. This allows them to seek compensation from utilities if they are found liable for the fire damage. Oppenheimer & Co. has recently completed the first transaction involving these claims related to the Eaton Fire and the Palisades Fire. Insurance companies have filed more than 37,000 claims related to the wildfires, totaling over $12 billion in payouts so far. Many affected residents are suing two key companies: Edison International and the Los Angeles Department of Water and Power. These companies are being blamed for issues that contributed to the fires. It is still uncertain if these claims will result in any payouts. California law makes it easier to hold utilities responsible for fire damage, but investigations into the causes of the fires are ongoing and could take months. This isn't the first time Wall Street has dealt with subrogation claims from wildfires. For instance, in the past, a company called Baupost Group secured claims against PG&E for fires that occurred in 2017. They were able to negotiate a significant settlement that provided large returns. However, this has raised concerns among wildfire victims, who feel that financial interests sometimes overshadow their rights. Recently, Cherokee Acquisition has also brokered substantial deals related to insurance claims from the 2023 Maui wildfires, showing the growing market for such transactions.