California regulators forced insurers to price wildfire risk using 20-year historical average losses rather than forward-looking catastrophe models, and prevented them from passing through higher reinsurance costs; as wildfires grew more frequent and severe, historical data became a poor predictor and insurers could not price to actual risk, leading major insurers to withdraw.

causalpending

Speaker

Howard Marks

Evidence Quote

Insurers were prohibited from using forward-looking catastrophe models to set rates for wildfire risk. Instead, they were required by law to base their rates on historical average losses over the previous 20 years.

Source

More on Repealing the Laws of EconomicsOaktree Capital
Created: 6/18/2026, 2:18:14 PM

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