The New Wildfire Economy: How California’s Legal & Capital Shifts are Reshaping Subrogation

At the 13th Annual Convergence 2025 Conference in Bermuda, SubroSmart Founder and CEO Greg Zarin joined the opening panel discussion on wildfire risk and recovery, sharing insights into how shifting legal, financial, and regulatory frameworks are redefining the wildfire economy. 

The panel explored the growing intersection of litigation, legislation, and capital markets, focusing on how wildfire risk continues to evolve beyond traditional loss models. The conversation focused on how insurers, reinsurers, and investors are adapting to an environment where both climate change and regulation are reshaping how losses are financed and recovered. 

Zarin’s remarks, also featured in Bermuda Reinsurance Magazine’s article “California’s Subrogation Shake-Up: What It Means for Wildfire Capital,” highlighted new legislative developments in California that may influence how subrogation recoveries are pursued, financed, and priced. 

“There are new measures that have been passed in California and considered elsewhere regarding the transfer and assignment of subrogation rights, sometimes to third parties like hedge funds,” Zarin explained. 

Subrogation — the right of insurers to recover losses from at-fault third parties — plays a central role in wildfire claims, particularly when losses stem from infrastructure failures rather than natural causes. As Zarin noted, this creates a unique bridge between catastrophic risk, legal recovery, and investment capital. 

Historically, hedge funds and other capital providers have acquired wildfire-related subrogation claims, viewing them as an alternative asset class that blends litigation strategy with predictable payout timelines. However, new California laws now require additional disclosure and resolution steps before third-party claim transfers, signaling greater oversight in how subrogation rights are monetized. 

“It’s a creative measure to encourage resolution and to try to level the playing field as far as profiting, or at least the appearance of profiting, from subrogation,” Zarin said. 

While Zarin believes the immediate impact of these laws may be limited, he emphasized their broader importance for investors, reinsurers, and carriers who rely on subrogation recoveries as part of their wildfire strategy. 

“Our goal is to hold those at fault parties accountable to prevent future wildfires from occurring,” he added. “It’s very important, if you’re looking at selling or transferring subrogation claims, that it’s done in a way that is compliant — and that you’re aware of any impacts with recent legislation.” 

For markets like Bermuda, where ILS investors are exploring new frontiers of wildfire exposure, these developments highlight how law, capital, and recovery are becoming increasingly intertwined. SubroSmart continues to play an active role in this evolving conversation, helping carriers and investors navigate a landscape where legal outcomes directly influence capital flows and risk appetite. 

Read the full feature in Bermuda Reinsurance Magazine:
California’s Subrogation Shake-Up: What It Means for Wildfire Capital