Insurers Are Abandoning Homeowners Over Wildfire Risk But Investing in Big Oil

The massive Los Angles fires, stoked by climate change, have been devastating for thousands of displaced homeowners and renters whose dwellings have been damaged or destroyed. The full costs of the catastrophe are still emerging but will surely run into the tens of billions of dollars.

The fires have once again thrown the growing crisis of the U.S. insurance industry into the media spotlight. Rising extreme weather events are contributing to skyrocketing insurance premiums for homeowners, and insurers are pulling out en masse from entire swaths of the country, including California. The home insurance system is teetering.

And yet, despite the fossil fuel industry’s clear role in driving the intensifying extreme weather that is upending home insurance for millions and denting industry profits, insurance companies remain committed to underwriting and investing in fossil fuels. In California, top insurers like State Farm, a focus of anger for Angelenos, have billions in oil and gas holdings, and are among the top shareholders of oil giants like ExxonMobil and Chevron, even as they decline to renew thousands of insurance policies across the state — including, last year, in the Pacific Palisades neighborhood at the center of the fires.

Fossil fuel-tied insurers facing losses and fleeing markets is now an old story reproduced anew with every latest extreme weather event.

“The insurance industry has the option of cutting exposure to fossil fuel expansion overnight,” Risalat Khan, senior strategist with Insure Our Future, a leading campaign focused on the insurance industry’s ties to the climate crisis, told Truthout. “But rather than doing that, they’re continuing to play both sides.”

Fossil Fuels, Extreme Weather and the Insurance Crisis

By broad consensus, climate change is helping to drive the rise and intensity of extreme weather events. The most authoritative global source on the impact of climate change, the Intergovernmental Panel on Climate Change (IPCC), has concluded as an “established fact” that “human-induced greenhouse gas emissions” have increased the frequency and intensity of extreme weather.

The IPCC also concluded with “high confidence” that fire weather conditions “will become more frequent in some regions at higher levels of global warming.” A recent scientific study found that the frequency of “extreme [wildfire] events” increased by “2.2-fold from 2003 to 2023, with the last 7 years including the 6 most extreme.”

Equally indisputable is the core driver of climate change: the burning of fossil fuels whose emissions heat up and pollute the atmosphere, accounting “for over 75 percent of global greenhouse gas emissions and nearly 90 percent of all carbon dioxide emissions,” according to the United Nations.

Rising extreme weather events like wildfires, flooding and hurricanes are causing an existential crisis within the home and property insurance industry. Unwilling or unable to simultaneously insure homeowners facing extreme weather events and also turn a big enough profit, insurance corporations are increasingly jacking up premiums or exiting regions altogether.

Climate change is not the sole driver of this insurance industry crisis, but it may be the main one. A recent report by Insure Our Future found that “over one-third of weather-related insured losses over the last two decades, totaling $600 billion, can be attributed to climate change,” and that the “climate-attributed share of insured weather losses rose from 31% to 38% over the last decade on average.”

Insurance Industry Props Up Fossil Fuels

Yet, many insurance companies remain committed to propping up the fossil fuel industry — increasingly, their own gravedigger — as both insurers and investors. The fossil fuel industry could not proceed with business as usual, including its ongoing expansion, without the critical services that insurance companies provide in underwriting everything from the buildout of oil pipelines to the construction of liquefied natural gas (LNG) export facilities.

A 2023 Insure Our Future report estimated that a small handful of insurance giants — including AIG, Chubb and Liberty Mutual — took in around $2.6 billion from fossil fuel insurance in 2022. A 2024 report by Public Citizen and Rainforest Action Network showed how top insurers are widely underwriting the Gulf Coast LNG export boom.

Moreover, insurers don’t just insure the operations of the fossil fuel industry. They are massive investors in that very industry. A big part of the insurance industry business model involves repackaging a chunk of aggregate premium payments they take in from clients as pools of cash to invest in financial instruments like stocks and bonds.

Top insurers like State Farm have billions in oil and gas holdings, and are among the top shareholders of oil giants like ExxonMobil and Chevron, even as they decline to renew thousands of insurance policies.

Nor are insurance companies minor investors. They are huge, multifaceted financial institutions, and, with over a half-trillion dollars invested in fossil fuels, have major stakes in the same oil and gas companies they are underwriting, feeding the very extreme weather that is generating a crisis in their own industry.

Khan calls this a “vicious cycle” where insurers “are making the problem worse by investing and underwriting fossil fuel expansion, despite being exposed to paying out these losses.”

Khan told Truthout that insurers do this with the assumption that they can reduce their risk by nonrenewing policies or raising premiums. “They’re making the risk worse and then charging more for those risks, or removing those from the balance sheets,” he said.

Overall, says Khan, this “pushes the broader system towards these tipping points where we cannot manage these risks anymore and people don’t have the money to be able to pay for these costs.”

California’s Insurance Crisis

These broader dynamics are playing out in the catastrophic Los Angeles fires and in California’s rising extreme weather more generally.

Scientists and world leaders have noted that climate change likely intensified the Los Angeles fires, with “weather whiplash” and low soil and fuel moisture levels. More broadly, state agencies have reported extensively on the climate crisis’s impact in California, affecting everything from coastal erosion and water supply to fire risks and damage to agriculture.

Fifteen of the twenty most destructive wildfires in California history have occurred over the last decade.

As a result of rising extreme weather events in California and the massive costs of insurance payouts, companies have been curtailing their business in the state. In 2023, 7 of the top 12 insurance companies in California paused or limited new policies there.

Khan notes that companies like State Farm, Travelers, AIG, Liberty Mutual, and others have simultaneously pulled back from insuring Californians while also remaining wedded to fossil fuels.

“These are all insurers that either have huge investments in fossil fuels or they’re underwriting fossil fuel expansion,” he said. “With each of these companies, the hypocrisy is very visible.”

This insurance crunch has several consequences, including piling more people into an already overburdened state insurance plan, and driving up rental and homeownership costs against the backdrop of a housing shortage.

At the same time, top insurers in California remain committed to investing in fossil fuels. A 2023 briefing by Insure Our Future identified a “dirty dozen” group of home insurers — including Berkshire Hathaway, State Farm and Nationwide — that have restricted coverage in California citing climate risks, but remain deeply interlocked with the fossil fuel industry.

Collectively, these companies have an “estimated $113 billion of investments in and $3.6 billion of underwriting income from fossil fuels,” said the briefing.

Looking at Insurance Fossil Fuel Holdings

State Farm, the biggest home insurer in both California and the U.S., has become a focus of anger among Los Angeles residents for canceling tens of thousands of home and apartment insurance policies last year, including 70 percent of its policies in the Pacific Palisades ZIP code. State Farm projects it will drop 1 million policies in California over the next five years.

Yet, at the exact time that State Farm is nonrenewing home insurance policies in California because of “rapidly growing catastrophe exposure,” it has doubled down on fossil fuels.

This insurance crunch has several consequences, including driving up rental and homeownership costs against the backdrop of a housing shortage.

Last September, the Wall Street Journal reported that State Farm and Berkshire Hathaway, which also does extensive business in California, “made multibillion-dollar bets on major oil companies” that were large enough to help offset a decline in fossil fuel investments in other parts of the industry.

The investigation noted that State Farm and Berkshire “drove the industry’s overall exposure to fossil fuels higher, pushing it to 4.4% of their portfolios from 3.8%,” and that “the value of fossil-fuel holdings by the property-and-casualty industry rose to $84.6 billion” in 2023 from $57 billion in 2014, driven in part by those two insurers’ investments.

A Truthout analysis of State Farm’s most recent SEC disclosure of its holdings, filed in November 2024, less than two months before the Los Angeles fires started, shows continued huge investments in fossil fuels.

For example, the disclosure reveals over $5.5 billion of holdings in just two Big Oil supermajors, with $3,577,589,566 in ExxonMobil and $1,963,729,843 in Chevron. According to the financial data site WhaleWisdom.com, this makes State Farm among the top 20 shareholders of both companies. The filing also shows a $411,541,212 stake in Duke Energy and $122,536,947 invested in Shell.

These fossil fuel and utility companies have appeared on numerous lists as among the top greenhouse gas and CO2 emitters in the world. State Farm also disclosed $86,443,949 worth of holdings in Enbridge, the company behind the controversial Line 3 and Line 5 pipelines.

Truthout reached out to State Farm for comment but did not receive a response.

“They Have the Option of Cutting Exposure”

There’s a big role for federal and state regulators to play in driving a wedge between the insurance industry and fossil fuels.

In 2023, the Senate Budget Committee launched an investigation into several major companies that insure and invest in fossil fuel projects. Organizers in states like New York and Connecticut are pushing legislation to curtail the insuring of fossil fuels or to tax fossil fuel insurers.

Khan says regulators in states like California, who have noted ties between insurers and fossil fuels before, could compel insurers doing business in the state to disclose the new or expanding fossil fuel projects they are underwriting.

After a “Climate Superfund” bill aimed at making fossil fuel polluters pay to address the harms of climate change failed last year, a new effort is in the works, and California’s former insurance commissioner has come out in support of making fossil fuel polluters pay.

Ultimately, a huge question looms over the insurance industry: Is it really worth propping up the fossil fuel industry even as climate chaos upends its own business?

Insure Our Future’s 2024 Scorecard ends by noting that, among 28 major property and casualty insurers overseeing more than one-third of the industry’s collective global market share, fossil fuel premiums “represent under 2% of their total insurance premiums in 2023 — essentially pocket change.”

“Why are insurers destabilizing the majority of their business for such a small fraction of revenue that they’re getting from fossil fuels?” asks Khan. “Does this really make economic sense for insurers?”

Khan takes some solace in the knowledge that people are catching onto the role insurers play in the climate crisis. Climate and environmental justice organizers across the U.S. and beyond are increasingly focusing on insurance giants.

“The insurance industry could be one of the biggest positive forces in the climate story,” said Khan. “They can look at their fossil fuel clients and say, we’re not going to insure their reckless expansion plans anymore, because this is too costly for us and it’s too costly for everyone.”