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Private providers have started returning to the fire-ravaged state, but its insurer of last resort still has huge and growing exposure.
The massive wildfires in Pacific Palisades and Altadena in Southern California may deal a devastating blow to the state’s fragile home insurance market, which is in the midst of large-scale reforms as part of an effort to lure private insurers back to the state.
In the years running up to yesterday’s, today’s, and likely tomorrow’s fires, several home insurers announced plans to stop writing new policies in California, or even leave the state entirely. The industry and many analysts blamed not just California’s famously hostile mix of dry vegetation, high winds, and scarce rains,but also a rise in construction and reinsurance costs and a regulatory system that made it difficult for insurers to raise rates or think prospectively about risk when setting rates.
In other words, it was simply easier for insurers to not renew policies than it was for them to increase rates to better adjust for risk. Some of these non-renewals occurred in the area now affected by the Eaton Fire in Altadena, though they were most prevalent in the Bay Area and the Sierra Nevada foothills.
In response, California’s insurance commissioner Ricardo Lara rolled out a set of reforms last year thattried to both expand insurance in wildfire prone areas and lure insurers back to the state. The new rules would allow insurers to use models to determine risk (not just historical data, as the law had previously been interpreted to allow) while also mandating that insurance companies operating in the state write policies in fire-prone areas as well as in those that are relatively safe. Lara thenissued another rule late last year allowing insurers to use the cost of reinsurance in determining their rates, which insurers in the rest of the country are allowed to do.
Allstate, which announced in November, 2022 that it would stop writing new home insurance policies in California, said last spring that it was considering a return to the state based on the possibility of models being allowed for ratemaking. At the end of last year, partly in response to the reforms, Farmers also said that it would restart writing new policies for some lines of business in California, and that it would increase the number of new homeowners insurance policies it writes every month after instituting limits in 2023. Last week, Verisk submitted a model to project wildfire risk to the state for regulatory agency review for use in rate-setting.
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Consumer advocates have warned that these rules would lead to increases in insurance rates. So has Lara’s predecessor, Dave Jones, who has been skeptical of trying to grow the private insurance market by giving it more flexibility to set rates without addressing the core issues of climate change and fire management policy.
“In the long term, we’re not going to be able to ‘rate increase’ ourselves out of this problem,” he said in an interview with the University of California, pointing to Florida’s insurance problems as an example, despite the flexibility that insurers have in setting rates there. “In the short-and mid-term for California, giving insurers proposed higher rates will get them to start writing new insurance again — although many homes in the wildland urban interface will continue to face challenges. But in the longer term, higher rates alone are likely to be overwhelmed by the higher risks and losses from climate change — just like in Florida.”
Like Florida, California has a backup for the private market, an insurer of last resort. And, like Florida, it’s been trying to make it smaller, to little avail. It may now be so large as to place the rest of the state at financial risk.
California’s FAIR Plan is a fire insurance pool that all property and casualty insurers operating in the state contribute to in proportion to how much business they have in the state; homeowners turn to FAIR when they can’t get insurance otherwise. As the state has experienced massive wildfires and insurers have pulled out, the size of the FAIR Plan has ballooned, with exposure rising to $458 billion in 2024 from $153 billion in 2020, even as it explicitly says that its “goal is attrition” (i.e. getting customers back on normal insurance plans).
“It’s a socialized cost,” Kate Gordon, the chief executive of California Forward, a policy nonprofit, and former advisor to Secretary of Energy Jennifer Granholm, told me. “We see more and more people switching to the FAIR plan. It’s getting massively oversubscribed. It’s going to hit some kind of wall at some point.”
The communities with the most wildfire exposure for the insurer include vacation areas throughout the state such as Lake Arrowhead, Truckee, and Big Bear Lake, and affluent residential communities including Berkeley and the San Francisco suburb Orinda. They also include Pacific Palisades, the fifth most wildfire-exposed market for FAIR in Southern California, with some $5.9 billion of exposure.
While the fires have yet to be substantially contained, let alone extinguished, and the damage has not yet been calculated, the still-raging fires will likely constitute a major hit to the FAIR Plan and California insurers. The number of residential FAIR policies in the Pacific Palisades zip code grew by over 80% between 2023 and 2024, and has quadrupled since 2020. The total financial exposure for residential insurance in Pacific Palisades doubled in the past year, growing to almost $3 billion. In one zipcode affected by the fire in Altadena, residential FAIR plan policies grew by over 40% since 2020, with around $950 million of total exposure.
“As the risk of more climate change-intensified wildfires increases in California, a major wildfire in one geographical area concentrated with FAIR Plan-insured properties could overwhelm the FAIR Plan’s reserves and its capacity to quickly and fully pay consumers’ claims,” Lara wrote in a bulletin in September.
Like other states with insurers of last resort, the FAIR Plan can seek cash from insurers — which could, if the losses are large enough, extract “temporary supplemental fees from their own policyholders,” according to new California insurance regulations. This would mean that Californians who were able to buy private insurance — because they don’t live in a region of the state that insurers have abandoned — could be on the hook for massive wildfire losses. While such an assessment has not occurred since 1994, Victoria Roach, the FAIR Plan’s president, warned in a hearing before the State Assembly last March that a major fire could knock out the plan’s reserves and force it to go to insurers — and their policyholders — to shell out for the difference.
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For now, at least, the math simply doesn’t work. Enter the EREV.
American EVs are caught in a size conundrum.
Over the past three decades, U.S. drivers decided they want tall, roomy crossovers and pickup trucks rather than coupes and sedans. These popular big vehicles looked like the obvious place to electrify as the car companies made their uneasy first moves away from combustion. But hefty vehicles and batteries don’t mix: It takes much, much larger batteries to push long, heavy, aerodynamically unfriendly SUVs and trucks down the road, which can make the prices of the EV versions spiral out of control.
Now, as the car industry confronts a confusing new era under Trump, signals of change are afoot. Although a typical EV that uses only a rechargeable battery for its power makes sense for smaller, more efficient cars with lower energy demands, that might not be the way the industry tries to electrify its biggest models anymore.
The predicament at Ford is particularly telling. The Detroit giant was an early EV adopter compared to its rivals, rolling out the Mustang Mach-E at the end of 2020 and the Ford F-150 Lightning, an electrified version of the best-selling vehicle in America, in 2022. These vehicles sell: Mustang Mach-E was the No. 3 EV in the United States in 2024, trailing only Tesla’s big two. The Lightning pickup came in No. 6.
Yet Ford is in an EV crisis. The 33,510 Lightning trucks it sold last year amount to less than 5% of the 730,000-plus tally for the ordinary F-150. With those sales stacked up against enormous costs needed to invest in EV and battery manufacturing, the brand’s EV division has been losing billions of dollars per year. Amid this struggle, Ford continues to shift its EV plans and hasn’t introduced a new EV to the market in three years. During this time, rival GM has begun to crank out Blazer and Equinox EVs, and now says its EV group is profitable, at least on a heavily qualified basis.
As CEO Jim Farley admitted during an earnings call on Wednesday, Ford simply can’t make the math work out when it comes to big EVs. The F-150 Lightning starts at $63,000 thanks in large part to the enormous battery it requires. Even then, the base version gets just 230 miles of range — a figure that, like with all EVs, drops quickly in extreme weather, when going uphill, or when towing. Combine those technical problems and high prices with the cultural resistance to EVs among many pickup drivers and the result is the continually rough state of the EV truck market.
It sounds like Ford no longer believes pure electric is the answer for its biggest vehicles. Instead, Farley announced a plan to pivot to extended-range electric vehicle (or EREV) versions of its pickup trucks and large SUVs later in the decade.
EREVs are having a moment. These vehicles use a large battery to power the electric motors that push the wheels, just like an EV does. They also carry an onboard gas engine that acts as a generator, recharging the battery when it gets low and greatly increasing the vehicle’s range between refueling stops. EREVs are big in China. They got a burst of hype in America when Ram promised its upcoming Ramcharger EREV pickup truck would achieve nearly 700 miles of combined range. Scout Motors, the brand behind the boxy International Scout icon of the 1960s and 70s, is returning to the U.S. under Volkswagen ownership and finding a groundswell of enthusiasm for its promised EREV SUV.
The EREV setup makes a lot of sense for heavy-duty rides. Ramcharger, for example, will come with a 92 kilowatt-hour battery that can charge via plug and should deliver around 145 miles of electric range. The size of the pickup truck means it can also accommodate a V6 engine and a gas tank large enough to stretch the Ramcharger’s overall range to 690 miles. It is, effectively, a plug-in hybrid on steroids, with a battery big enough to accomplish nearly any daily driving on electricity and enough backup gasoline to tow anything and go anywhere.
Using that trusty V6 to generate electricity isn’t nearly as energy-efficient as charging and discharging a battery. But as a backup that kicks in only after 100-plus miles of electric driving, it’s certainly a better climate option than a gas-only pickup or a traditional hybrid. The setup is also ideally suited for what drivers of heavy duty vehicles need (or, at least, what they think they need): efficient local driving with no range anxiety. And it’s similar enough to the comfortable plug-and-go paradigm that an extended-range EV should seem less alien to the pickup owner.
Ford’s big pivot looks like a sign of the times. The brand still plans to build EVs at the smaller end of its range; its skunkwords experimental team is hard at work on Ford’s long-running attempt to build an electric vehicle in the $30,000 range. If Ford could make EVs at a price at least reasonably competitive with entry-level combustion cars, then many buyers might go electric for pure pragmatic terms, seeing the EV as a better economic bet in the long run. Electric-only makes sense here.
But at the big end, that’s not the case. As Bloombergreports on Ford’s EV trouble, most buyers in the U.S. show “no willingness to pay a premium” for an electric vehicle over a gas one or a hybrid. Facing the prospect of the $7,500 EV tax credit disappearing under Trump, plus the specter of tariffs driving up auto production costs, and the task of selling Americans an expensive electric-only pickup truck or giant SUV goes from fraught to extremely difficult.
As much as the industry has coalesced around the pure EV as the best way to green the car industry, this sort of bifurcation — EV for smaller vehicles, EREV for big ones — could be the best way forward. Especially if the Ramcharger or EREV Ford F-150 is what it takes to convince a quorum of pickup truck drivers to ditch their gas-only trucks.
Current conditions: People in Sydney, Australia, were told to stay inside after an intense rainstorm caused major flooding • Temperatures today will be between 25 and 40 degrees Fahrenheit below average across the northern Rockies and High Plains • It’s drizzly in Paris, where world leaders are gathering to discuss artificial intelligence policy.
Well, today was supposed to be the deadline for new and improved climate plans to be submitted by countries committed to the Paris Agreement. These plans – known as nationally determined contributions – outline emissions targets through 2030 and explain how countries plan to reach those targets. Everyone has known about the looming deadline for two years, yet Carbon Briefreports that just 10 of the 195 members of the Paris Agreement have submitted their NDCs. “Countries missing the deadline represent 83% of global emissions and nearly 80% of the world’s economy,” according to Carbon Brief. Last week UN climate chief Simon Stiell struck a lenient tone, saying the plans need to be in by September “at the latest,” which would be ahead of COP30 in November. The U.S. submitted its new NDC well ahead of the deadline, but this was before President Trump took office, and has more or less been disregarded.
Many of the country’s largest pension funds are falling short of their obligations to protect members’ investments by failing to address climate change risks in their proxy voting. That’s according to new analysis from the Sierra Club, which analyzed 32 of the largest and most influential state and local pension systems in the U.S. Collectively, these funds have more than $3.8 trillion in assets under management. Proxy voting is when pensions vote on behalf of shareholders at companies’ annual meetings, weighing in on various corporate policies and initiatives. In the case of climate change, this might be things like nudging a company to disclose greenhouse gas emissions, or better yet, reduce emissions by creating transition plans.
This report looked at funds’ recent proxy voting records and voting guidelines, which pension staff use to guide their voting decisions. The funds were then graded from A (“industry leaders”) to F (“industry laggards”). Just one fund, the Massachusetts Pension Reserves Investment Management (MassPRIM), received an “A” grade; the majority received either “D” or “F” grades. Others didn’t disclose their voting records at all. “To ensure they can meet their obligations to protect retirees’ hard-earned money for decades to come, pensions must strengthen their proxy voting strategies to hold corporate polluters accountable and support climate progress,” said Allie Lindstrom, a senior strategist with the Sierra Club.
Football fans in Los Angeles watching last night’s Super Bowl may have seen an ad warning about the growing climate crisis. The regional spot was made by Science Moms, a nonpartisan group of climate scientists who are also mothers. The “By the Time” ad shows a montage of young girls growing into adults, and warns that climate change is rapidly altering the world today’s children will inherit. “Our window to act on climate change is like watching them grow up,” the voiceover says. “We blink, and we miss it.” It also encourages viewers to donate to LA wildfire victims. A Science Moms spokesperson toldADWEEK they expected some 11 million people to see the ad, and that focus group testing showed a 25% increase in support for climate action among viewers. The New York Timesincluded the ad in its lineup of best Super Bowl commercials, saying it was “a little clunky and sanctimonious in its execution but unimpeachable in its sentiments.”
General Motors will reportedly stop selling the gas-powered Chevy Blazer in North America after this year because the company wants its plant in Ramos Arizpe, Mexico, to produce only electric vehicles. The move, first reported by GM Authority, means “GM will no longer offer an internal combustion two-row midsize crossover in North America.” If you have your heart set on a Blazer, you can always get the electric version.
In case you missed it: Airbus has delayed its big plan to unveil a hydrogen-powered aircraft by 2035, citing the challenges of “developing a hydrogen ecosystem — including infrastructure, production, distribution and regulatory frameworks.” The company has been trying to develop a short-range hydrogen plane since 2020, and has touted hydrogen as key to helping curb the aviation industry’s emissions. It didn’t give an updated timeline for the project.
“If Michael Pollan’s basic dietary guidance is ‘eat food, not too much, mostly plants,’ then the Burgum-Wright energy policy might be, ‘produce energy, as much as you can, mostly fossil fuels.’”
–Heatmap’s Matthew Zeitlin on the new era of Trump’s energy czars
Chris Wright and Doug Burgum started their reign this week by amplifying the president and beating back Biden-era policies.
The Trump administration’s two most senior energy officials, Secretary of the Interior Doug Burgum and Secretary of Energy Chris Wright, are both confirmed and in office as of this week, and they have started to lay out their vision for how their agencies will carry out Donald Trump’s “energy dominance” agenda.
Where the Biden administration sought to advance traditional Democratic policy around public lands (namely, to expand, conserve, and preserve them) while also boosting the development of renewable energy, Burgum and Wright have laid out something of the inverse approach: Maximize the production of domestic energy and minerals, with a focus on fossil fuels, and to the extent non-fossil fuels are a priority, they should be “baseload” or “firm” power sources like nuclear, hydropower, or geothermal.
If Michael Pollan’s basic dietary guidance is “eat food, not too much, mostly plants,” then the Burgum-Wright energy policy might be, “produce energy, as much as you can, mostly fossil fuels.”
Burgum and Wright each laid out his philosophy in the form of secretarial orders, the agency equivalent of an executive order.
“Our focus must be on advancing innovation to improve energy and critical minerals identification, permitting, leasing, development, production, transportation, refining, distribution, exporting, and generation capacity of the United States to provide a reliable, diversified, growing, and affordable supply of energy for our Nation,” reads Burgum’s “Unleashing American Energy” order.
“The Department will bring a renewed focus to growing baseload and dispatchable generation to reliably meet growing demand,”reads Wright’s first secretarial order.
Burgum’s orders are largely Interior-specific elaborations of Trump’s early round of executive orders. In “Addressing the National Energy Emergency,” Burgum echoes Trump’s executive order declaring — you guessed it — a national energy emergency, calling for the department to “identify the emergency authorities available to them, as well as all other legal authorities, to facilitate the identification, permitting, leasing, development, production, transportation, refining, distribution, exporting, and generation of domestic energy resources and critical minerals.” He also criticizes the Biden administration for having “driven our Nation into a national emergency, where a precariously inadequate and intermittent energy supply, and an increasingly unreliable grid, require swift and decisive action.”
In another order, “Unleashing American Energy,” which follows a similarly titled executive order, Burgum cites the Trump administration’s call for deregulation to allow more extraction of energy commodities and energy production: “By removing such regulations, America's natural resources can be unleashed to restore American prosperity. Our focus must be on advancing innovation to improve energy and critical minerals identification, permitting, leasing, development, production, transportation, refining, distribution, exporting, and generation capacity of the United States to provide a reliable, diversified, growing, and affordable supply of energy for our Nation.”
The order calls for the Interior department to examine a number of Biden-era guidelines and rules, including 2024’s public lands rule, formally known as Conservation and Landscape Health, which went into effect last June. The rule put landscape preservation on a similar plane to energy development, mining, logging, or grazing among uses for public lands, and was opposed by a number of interest groups, including the ranching and energy industries.
It’s not just public lands that will be more open to fossil fuel exploration and extraction, it’s also the seas. Burgum issued an order following on Trump’s attempt to roll back restrictions on offshore drilling, notifying the department that “all Biden [outer continental shelf] withdrawals of the OCS for oil and gas leasing have been revoked.”
Two other orders were primarily deregulatory. One implemented the Trump guideline that “for each new regulation that they propose to promulgate, they shall identify at least 10 existing Department regulations to be eliminated.” And the other followed on Trump’s order opening up Alaska to more mining and energy extraction, which, among other actions, revoked a 2021 order cancelling oil and gas leases in the Alaska National Wildfire Reserve and reinstated a Secretary’s Order issued by then-Interior Secretary Ryan Zinkein 2017 opening up Alaska for more oil activity, which itself reversed a 2013 order limiting oil and gas development.
While Burgum’s orders focus on the energy potential beneath the ground and the sea, Wright’s first secretarial order is a celebration of energy writ large, consistent with his often articulated views on the subject. “Energy is the essential ingredient that enables everything we do. A highly energized society can bring health, wealth, and opportunity for all,” he writes.
The document starts by talking down net-zero goals, saying that “net-zero policies raise energy costs for American families and businesses, threaten the reliability of our energy system, and undermine our energy and national security.”
“Going forward,” it says, “the Department’s goal will be to unleash the great abundance of American energy required to power modern life and to achieve a durable state of American energy dominance.”
In Wright’s version of the “energy emergency” order, he commits the department to “identify[ing] and exercise[ing] all lawful authorities to strengthen the nation’s grid, including the backbone of the grid, our transmission system,” in order to deal with the “current and anticipated load growth on our nation’s electric utilities.” He also says the department will focus on “baseload and dispatchable generation to reliably meet growing demand” — i.e. natural gas, along with some geothermal, hydropower, and nuclear.
In keeping with the president’s hostility or indifference toward the most widespread forms of renewable energy generation, Wright writes that the DOE will focus its substantial research and development efforts on “affordable, reliable, and secure energy technologies, including fossil fuels, advanced nuclear, geothermal, and hydropower,” and specifically calls out the Department’s fusion research for focus: “The Department must also prioritize true technological breakthroughs — such as nuclear fusion, high-performance computing, quantum computing.”
Wright refers to the energy department’s considerable research on renewables through its network of national laboratories only via implication, with an eye toward containing the funding demands of such work. “The Department will comprehensively review its R&D portfolio,” the order says. “As part of that review, the Department will rigorously enforce project milestones to ensure that taxpayer resources are allocated appropriately and cost-effectively consistent with the law.” Not mentioned at all was the department’s Loan Programs Office, which the Biden administration fortified by means of the Inflation Reduction Act. Bloomberg News reported that the department is looking to roll back some of the office’s loan guarantees to ensure that its funding awards “are consistent with President Trump’s executive orders and priorities.”
One area where there may be consistency between the Biden and Trump energy departments is in support for nuclear power.
Throughout the order, nuclear energy gets called out for praise and attention, while other forms of non-carbon-emitting energy go unmentioned. “The long-awaited American nuclear renaissance must launch during President Trump’s administration. As global energy demand continues to grow, America must lead the commercialization of affordable and abundant nuclear energy. As such, the Department will work diligently and creatively to enable the rapid deployment and export of next-generation nuclear technology,” Wright writes.
Like Burgum, Wright takes a dim view of Biden-era regulatory initiatives, committing the department to reviewing proposals for liquefied natural gas terminals and promising a “comprehensive review of the DOE Appliance Standards Program.” Scrapping or overhauling appliance efficiency rules, like other envisioned Trump policies, would also help bolster demand for energy writ large.
The orders, while consistent with Trump’s broad directives on energy policy, do not match the vitriol and dismissiveness towards renewables that Trump himself employs. But that may be cold comfort to climate advocates and renewables developers. In Burgum’s and Wright’s philosophy, renewables have been given pride of place in government policies, effectively holding down fossil fuel resources — and that is going to change.
In one order, Burgum directs the department to ensure that its policies do not “bias government or private-sector decision making in favor of renewable energy projects as compared to oil, gas, or other mineral resource projects.” And neither he nor Wright appears to see little role for the fastest growing sources of generation — solar — in American “energy dominance.”
That is also in keeping with what Trump has been doing to achieve his energy priorities, as opposed to what he’s been saying about “unleashing American energy.” During the chaotic first few weeks of this administration, federal officials do not appear to have been treating fossil fuel and renewables equally so much as they have been scrambling to comply with executive orders by obstructing renewable permitting and then reversing themselves (unless, of course, it’s offshore wind).
As Trump’s energy policy finds its feet, we’ll find out if energy dominance is really just fossil fuel dominance.