Hedge Funds Targeting Fire Insurance Hit a Wall in California

Hedge funds speculating on wildfire insurance claims in California were just dealt a legal blow, after the state adopted new legislation designed to stifle such bets.

Under the law, approved last month by California Governor Gavin Newsom, alternative investment managers buying so-called subrogation claims from insurers would see those transactions voided unless the utilities targeted were given the option to settle on the same terms.

The bill will make it “a lot more difficult” for hedge funds to execute trades on favorable terms, Willis Hon, a partner at Los Angeles-based law firm Nossaman LLP, said in an interview. ...