Hedge fund makes $3 billion from investing in insurance claim buyout fro California wildfires

[Craig234]

Our country has an out of control financial sector. This example is a hedge fund making $3 billion from these investments in insurance claims from California wildfires.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Arguably, most of the profits extracted from the country by the financial sector are harmful rather than beneficial. We're out of control, with regulators, politicians, and voters all unconcerned and not doing anything. Instead, people bicker about nonsense.

'What Stage of Capitalism Is This?' Hedge Fund $3 Billion Richer Thanks to Wager on Wildfire Insurance Claims | Common Dreams News

 

[Aletheia]

Our country has an out of control financial sector. This example is a hedge fund making $3 billion from these investments in insurance claims from California wildfires.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Arguably, most of the profits extracted from the country by the financial sector are harmful rather than beneficial. We're out of control, with regulators, politicians, and voters all unconcerned and not doing anything. Instead, people bicker about nonsense.

'What Stage of Capitalism Is This?' Hedge Fund $3 Billion Richer Thanks to Wager on Wildfire Insurance Claims | Common Dreams News

The money came from insurers and reinsurers that wanted to offset their risks and difficulty in getting claims money back from a possibly bankrupt company (PG&E). The hedge fund gets a discount, but they still have to get the claims from PG&E. They also lost almost 80% of their (almost billion dollar) investment in PG&E stock, so I see it as more of a hedge in peripheral investments.

There are far worse hedge fund activities to be complaining about impropriety, IMO. Go look up Steve Cohen, for example. And with PG&E, I'd be more peeved about executive bonuses in the millions. Someone's clearly been running them into the ground over the years.

 

[Craig234]

The money came from insurers and reinsurers that wanted to offset their risks and difficulty in getting claims money back from a possibly bankrupt company (PG&E). The hedge fund gets a discount, but they still have to get the claims from PG&E. They also lost almost 80% of their (almost billion dollar) investment in PG&E stock, so I see it as more of a hedge in peripheral investments.

There are far worse hedge fund activities to be complaining about impropriety, IMO. Go look up Steve Cohen, for example. And with PG&E, I'd be more peeved about executive bonuses in the millions. Someone's clearly been running them into the ground over the years.

It's like a post about an example of Nazis wiping out a village of 5,000 and you say 'they've done far worse in other places to complain about'. I didn't say it's 'the worst'. And their losing money on an investment doesn't justify the excessive finance industry.

Yes, PG&E practices have other issues also, but it's about excessive finance IMO primarily as an issue. There's a long list of how the finance industry extracts trillions from our economy.

 

[Aletheia]

It's like a post about an example of Nazis wiping out a village of 5,000 and you say 'they've done far worse in other places to complain about'. I didn't say it's 'the worst'. And their losing money on an investment doesn't justify the excessive finance industry.

Yes, PG&E practices have other issues also, but it's about excessive finance IMO primarily as an issue. There's a long list of how the finance industry extracts trillions from our economy.

But, I don't see the Hedge Funds as being evil here. They are providing a service to the insurers, and have to do work to get that money back from PG&E. They are actually helping claim filers get reimbursed -- that's a good thing.

If it was easy, the insurers would not sell them claims, cheaply to the hedge funds. Ever tried collecting on a court order? Not easy at all.
They took a risk in doing so, it wasn't free money or even unethical that I can see.

Comparing it to Nazis wiping out a village of 5,000 is a bit extreme, don't you think? There is nothing here to really complain about, except PG&E's negligence over the years. If the hedge fund didn't get the 3 billion, the insurance companies, presumably would and pass that extra cost to collect on to customers.

 

[Craig234]

But, I don't really see the Hedge Funds as being evil here. They are providing a service to the insurers, and have to do work to get that money back from PG&E. They are actually helping claim filers get reimbursed -- that's a good thing.

If it was easy, the insurers would not sell them claims, cheaply. Ever tried collecting on a court order? Not easy at all.
They took a risk in doing so, it wasn't free money or even unethical that I can see.

Comparing it to Nazis wiping out a village of 5,000 is a bit extreme, don't you think? There is nothing here to really complain about, except PG&E's negligence over the years. If the hedge fund didn't get the 3 billion, the insurance companies, presumably would.

Could you be any more dishonest than to misrepresent my post to saying that it compares the hedge fund activities to the Nazi analogy, when it does no such thing? It compares your dismissing one minor example out of a huge list for not being the worst example, whatever the topic of large list of examples of bad things. It could be an example trump lie from a list of thousands. It could be any such list of bad things.

These things add up to a huge problem. You don't really address the topic. Re-read the OP for questions you haven't answered. Obviously, there are much larger and worse examples. This is one example that's smaller and less bad but raises the questions asked.

 

[Aletheia]

It's like a post about an example of Nazis wiping out a village of 5,000 and you say 'they've done far worse in other places to complain about'.

Could you be any more dishonest than to misrepresent my post to saying that it compares the hedge fund activities to the Nazi analogy, when it does no such thing? It compares your dismissing one minor example out of a huge list for not being the worst example, whatever the topic of large list of examples of bad things. It could be an example trump lie from a list of thousands. It could be any such list of bad things.

These things add up to a huge problem. You don't really address the topic. Re-read the OP for questions you haven't answered. Obviously, there are much larger and worse examples. This is one example that's smaller and less bad but raises the questions asked.

I felt I exactly answered. I didn't really understand your analogy and using Nazis -- maybe I misunderstood your point, but it seemed inappropriate and out there. I explained to you why this is not a bad and terrible thing. You don't seem to have an argument why it's so bad, nor even address my explanation. There is no problem here with the hedge funds. They are helping not pillaging. You haven't convinced me why it's so bad, other than complain about the finance industry making money off a hardship of fire disasters. That's what I got out of the OP, and tried to explain to you why you are misunderstanding it. The hedge funds, in this case, are taking a risk, and providing a benefit, and being rewarded for it. There's a lot I don't like about hedge funds and finance, but this one does not fit that category.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Come to think of it, I addressed this exactly. They got the money from PG&E claims that were awarded by the courts (well they likely have to collect it still). It helps the costs of insurance go down (sounds weird, but true), and they (the hedge funds) are helping the utilities stay afloat -- I explained they invested almost a billion dollars in the stock, with a clearly sinking ship. Do you really think that's such a terrible and harmful thing?

 

[Craig234]

Come to think of it, I addressed this exactly. They got the money from PG&E claims that were awarded by the courts (well they likely have to collect it still). It helps the costs of insurance go down (sounds weird, but true), and they (the hedge funds) are helping the utilities stay afloat -- I explained they invested almost a billion dollars in the stock, with a clearly sinking ship. Do you really think that's such a terrible and harmful thing?

Did you? And where did the money come from before that? Where is PG&E getting the billions for all these payments? From consumers, right? How much does that drive up the prices? Why did PG&E find that reduced maintenance and safety was more profitable despite the huge payments, what is broken about that system of regulation and incentives?

PG&E, before all this, blew up a neighborhood in a local city, San Bruno. They had neglected maintenance. And then, they lied about that. What's broken about all that?

Are you sure it lowers insurance prices? Seems to me there's something broken in that system also, if the court award leave the victims feeling they're better off selling them at a discount to the hedge fund - and that it would increase the cost of insurance, because the hedge fund will plan to get more (hence the $3 billion profit) than the victims would have settled for. So that's a dubious claim also.

The point is, the American economy has become far too dominated by finance extracting money from the economy. I can show you far more harmful examples. But there are countless examples all around practices that are parasitical, far in excess of the legitimate activities that make a contribution.

There is something fishy about the system being set up where the normal parts - the company that's supposed to provide safe energy, to courts awarding damages when it doesn't, the insurance industry - somehow leave a hole of an unmet need that allows a hedge to walk in and extract $3 billion dollars from somewhere in that system. From consumers, victims, insurance companies, some combination, somewhere.

 

[Craig234]

Come to think of it, I addressed this exactly. They got the money from PG&E claims that were awarded by the courts (well they likely have to collect it still). It helps the costs of insurance go down (sounds weird, but true), and they (the hedge funds) are helping the utilities stay afloat -- I explained they invested almost a billion dollars in the stock, with a clearly sinking ship. Do you really think that's such a terrible and harmful thing?

By the way, I had a similar reaction as you did to the point that there's a case that there is some legitimate function to their activity, that this appears to not be an example of the more harmful activities, and you were right to point that out. But it left me with the questions in the OP.

 

[Aletheia]

Did you? And where did the money come from before that? Where is PG&E getting the billions for all these payments? From consumers, right? How much does that drive up the prices? Why did PG&E find that reduced maintenance and safety was more profitable despite the huge payments, what is broken about that system of regulation and incentives?

Ok, this I agree with. Consumers are paying for mismanagement, and that bothers me a lot. I told you PG&E management is more to blame, and I am also peeved about their bonuses. I think we can agree, they did not deserve them, in light of crappy maintenance and years of negligence. But that has nothing to do with the hedge funds or getting the 3 billion. Your OP, as I understood it was complaining about profits and the financial sector, not PG&E negligence. Now you are mentioning PG&E negligence, yes, absolutely, they were. And they are paying for it.

PG&E, before all this, blew up a neighborhood in a local city, San Bruno. They had neglected maintenance. And then, they lied about that. What's broken about all that?

Well aware of that. I watched upper management get some silver hat of excellence award on the news right after that disaster, and that really peeved me, to say the least.

Are you sure it lowers insurance prices? Seems to me there's something broken in that system also, if the court award leave the victims feeling they're better off selling them at a discount to the hedge fund - and that it would increase the cost of insurance, because the hedge fund will plan to get more (hence the $3 billion profit) than the victims would have settled for. So that's a dubious claim also.

I tried to explain it. You can look into subrogation claims, to understand it better. Insurance companies are trying to offload some of their risk, and the hedge funds made money by buying many of their claims at a lower cost of the value of the claims. Those hedge funds are actually helping here, and yes making money, but at a risk, not free. I don't see them as being a nefarious middleman here, as I gather from your posts.

The point is, the American economy has become far too dominated by finance extracting money from the economy. I can show you far more harmful examples. But there are countless examples all around practices that are parasitical, far in excess of the legitimate activities that make a contribution.

There is something fishy about the system being set up where the normal parts - the company that's supposed to provide safe energy, to courts awarding damages when it doesn't, the insurance industry - somehow leave a hole of an unmet need that allows a hedge to walk in and extract $3 billion dollars from somewhere in that system. From consumers, victims, insurance companies, some combination, somewhere.

Not sure if you recall the rolling blackouts in CA 2000s, with huge extra premiums. The culprit in that case was Enron and traders milking the markets, playing games with the power grids. Those guys were caught laughing at elderly ladies who couldn't afford the extra costs, they were incurring while playing their games. Now, that's something that supremely pissed me off. I just think your anger, in this particular case, is misplaced.

 

[Craig234]

Not sure if you recall the rolling blackouts in CA 2000s, with huge extra premiums. The culprit in that case was Enron and traders milking the markets, playing games with the power grids. Those guys were caught laughing at elderly ladies who couldn't afford the extra costs, they were incurring while playing their games. Now, that's something that supremely pissed me off. I just think your anger, in this particular case, is misplaced.

Of course. Those were criminal companies who created scams to steal huge amounts of money, with Republicans' blessing.

In fact, at the heart of the major target, California, was that after they were caught, they wanted to be let off with a sweetheart settlement. The Democratic Governor, Gray Davis, refused and demanded they pay more.

Republicans then launched a recall petition against Davis, using an absurd issue primarily of an increase in DMV fees, and to California's shame, it worked. Enron called secret meetings, and some did not come, but one who did was Arnold Schwarzeneggar, who agreed to run in the special election for governor. Again, to California's shame, he won out of over 100 candidates, because of his celebrity.

He then gave Enron the sweetheart deal Davis had refused. Just to add icing to the 'you screwed up California' cake, Schwarzeneggar made a big show of rolling back the DMV increase he ran on - and then later added it back. Not enough shame yet? We re-elected him. He brought pretty much nothing but bad agendas and deficits, but then we fixed it with the next governors.

You don't seem to be hearing my larger issue with the excessive size of the financial sector and the harm it causes. Even when I spelled out issues that the current system has even if this hedge fund's activities have some justification, you did not seem to hear it.

 

[braindrain]

Our country has an out of control financial sector. This example is a hedge fund making $3 billion from these investments in insurance claims from California wildfires.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Arguably, most of the profits extracted from the country by the financial sector are harmful rather than beneficial. We're out of control, with regulators, politicians, and voters all unconcerned and not doing anything. Instead, people bicker about nonsense.

'What Stage of Capitalism Is This?' Hedge Fund $3 Billion Richer Thanks to Wager on Wildfire Insurance Claims | Common Dreams News

A extreme left wing site doesn’t like people making money. Why am I not surprised.

 

[Simpletruther]

Our country has an out of control financial sector. This example is a hedge fund making $3 billion from these investments in insurance claims from California wildfires.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Arguably, most of the profits extracted from the country by the financial sector are harmful rather than beneficial. We're out of control, with regulators, politicians, and voters all unconcerned and not doing anything. Instead, people bicker about nonsense.

'What Stage of Capitalism Is This?' Hedge Fund $3 Billion Richer Thanks to Wager on Wildfire Insurance Claims | Common Dreams News

Quite often these things are actual beneficial. Speculators take on risk, allowing others to take a safer position.

I suspect if you heard a hedge fund loosing 3 billion you wouldn't blink an eye, your concern only goes one way.

 

[Simpletruther]

Our country has an out of control financial sector. This example is a hedge fund making $3 billion from these investments in insurance claims from California wildfires.

We know they got $3 billion; where did that money actually come from, and how does it affect the cost of insurance and utilities?

Arguably, most of the profits extracted from the country by the financial sector are harmful rather than beneficial. We're out of control, with regulators, politicians, and voters all unconcerned and not doing anything. Instead, people bicker about nonsense.

'What Stage of Capitalism Is This?' Hedge Fund $3 Billion Richer Thanks to Wager on Wildfire Insurance Claims | Common Dreams News

Another grasping to blame the rich and capitalism, based on emotions and envy.

The link explains where the profit comes from.

Insurers sell subrogation claims to investors at a discount because they enjoy the certainty of being paid right away, but in the process they also lose the right to sue to recuperate damages endured by policyholders.



These transactions are good things for both parties, it reduced risk for the utility, and on exchange for tsking on more risk they got a profit.

It could have went the other way, you do realize risk taker sometimes loose, and thst loss is a loss somebody else didn’t have to take.


Contrary in emotional claims of anti free market people, speculators are good for the economy by giving others an outlet to reduce risk exposure, and this increases efficiency and wealth for the economy in general.