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Guy Carpenter & Co. LLC said Tuesday it has been appointed as the sole reinsurance broker and adviser for the California wildfire fund, currently administered by the California Earthquake Authority.
The $21 billion fund was signed into law earlier in July to help utilities in the state pay for claims arising from future wildfires related to their equipment.
Brokerage services for the program will be jointly provided by Guy Carpenter’s Glendale and Mission Viejo, California, offices, the reinsurance brokerage division of Marsh & McLennan Cos. Inc. said in a statement.
“Guy Carpenter is focused on helping the public sector at the national, state and municipal levels. By leveraging private capital for public risks and innovative tools, we can help public entities mitigate risk and improve their communities,” David Priebe, vice chairman of Guy Carpenter said in the statement.
California Gov. Gavin Newsom proposed the fund in June after S&P Global Ratings Inc. warned it could lower its ratings on Edison, Southern California Edison Co. and San Diego Gas & Electric Co. leaving the state without an investment grade investor-owned utility ahead of the 2019 wildfire season.
The fund includes an initial contribution of around $4.8 billion from PG&E Corp., which filed for bankruptcy in January amid an estimated $30 billion in wildfire liabilities, per a July 25 release from the utility provider.
The fund also has the backing of Sempra Energy, parent of San Diego Gas & Electric which has agreed to contribute $450 million per a July 11 U.S. Securities and Exchange Commission filing, while Edison has agreed to pay an initial $2.4 billion into the fund, according to a July 25 company statement.
Under California’s law of “inverse condemnation”, if a utility’s facilities are determined to be the substantial cause of a wildfire, the utility could be liable for all of the wildfire’s property damage and other associated costs without the utility being negligent.
The fund is part of broader wildfire legislation passed by California lawmakers July 11.
A lack of regulatory and legislative reform to reduce risks for California’s electric utilities could leave the state without an investment grade investor-owned utility ahead of the 2019 wildfire season, according to a briefing released Tuesday by S&P Global Ratings Inc.