From rising sea levels that could flood coastal settlements, to droughts that threaten farms statewide, to apocalyptic forest fires, California is on the front lines of the climate disaster. But due to its size and its impact on the rest of the country, the state is also perfectly positioned to wield a key, under-discussed tool for fighting climate change: insurance regulation.
But as loss of life and property damage grow in the state with each passing season, California insurance commissioner Ricardo Lara has been backpedaling on the issue — after receiving more than $17,000 in donations and gifts from fossil fuel interests during his 2018 campaign.
When he was sworn into the job three years ago, Lara vowed to use his power to combat global warming.
“We need bold action to ensure our communities adapt and are resilient to this new reality,” said Lara during his January 2019 inauguration speech. “There is no other industry that has the necessary expertise to ensure that California is prepared to mitigate and reduce risk to our communities and environment.”
Lara was correct: insurance regulation is an important front in the battle against climate change. That’s because insurance companies fuel global warming by underwriting fossil fuel projects and investing the premiums they collect from consumers in fossil fuel companies. State insurance commissioners have the power to curtail both of these behaviors.
California emerged as a leader in addressing insurance companies’ links to fossil fuel companies under the direction of Lara’s predecessor, Dave Jones. Such efforts were pivotal, since California’s insurance market is so large it helps set industrywide standards.
“Lara’s been an incredible disappointment,” said Ross Hammond, senior strategist at the climate advocacy group the Sunrise Project. “He has done almost nothing in regards to climate change.”
Just a few months into his term, Lara had a chance to take action on the matter — and chose not to. In March 2019, dozens of advocacy and activist groups submitted a petition asking Lara to require insurers to disclose their investments in fossil fuels, and which fossil fuel projects they insure.
“If we knew which companies were underwriting a refinery or a gas storage site, then we would have the ability to target them and get them not to do it,” Jamie Court, president of Consumer Watchdog, which was the leading group on the petition, told us.
Lara denied the petition in April 2019. In the letter explaining his denial, he claimed that he was “pursuing a much more comprehensive strategy” on climate than the actions requested by the petition, and asked for collaboration between “the petitioners, consumers, and the insurance industry.”
Since then, that strategy hasn’t materialized.
The denial “just shows the shallowness of his commitment to the environment,” Court said. “His answer that we’re going to work with insurance to stem climate change is not a real answer, because insurance companies are one of the biggest drivers of the fossil fuel boom.”
Lara’s approach to climate matters could become a major issue in his reelection battle this year. His reelection campaign and the Department of Insurance did not respond to requests for comment.
Big Money and Beyoncé Tickets
While serving as state insurance commissioner from 2011 to 2019, Jones required large insurance companies to disclose their investments in fossil fuels, and requested that insurance companies divest their holdings in thermal coal. The entreaty led to over $4 billion in divestments.
Even advocates who called for more drastic action at the time acknowledge that Jones’s policies were important to get the ball rolling. “He started the process,” Court said. “I think he could have gone farther and faster, but he took a step into the waters.”
Laws and regulations inspired by Jones’s policies were recently implemented in Connecticut and New York, two critical states for the insurance industry.
Term limits prevented Jones from running again in 2018, and he was replaced by Lara, then a state senator. Lara had sponsored bills focusing on climate change’s impact on insurance, suggesting potential sensitivity to the issue. But perhaps a better augur of the direction he would take once elected was the $65,000 of contributions from oil and gas companies that he had accepted over the course of his career, including during his campaign for insurance commissioner.
During the campaign and after his election, Lara also accepted over $270,000 in campaign donations from insurers and individuals with ties to the insurance industry. After sustained criticism for the perceived conflict of interest, Lara announced he would no longer serve as his own campaign treasurer, returned $83,000 worth of contributions, and temporarily suspended his campaign fundraising in summer 2019.
Lara wasn’t just taking campaign money from the fossil fuel industry.
In 2018, shortly before his election, Lara accepted a gift of two field-level tickets to a Beyoncé concert from Sempra Energy, an $11 billion California-based natural gas and electricity company that several months ago agreed to pay $1.8 billion for its role in the worst natural gas leak in US history, near Los Angeles.
The following year, Sempra and fossil fuel giant Chevron made charitable donations on Lara’s behalf to the LGBT rights group Equality California to support the Sacramento Equality Awards, according to state ethics records.
Chevron gave $15,000, while Sempra contributed $5,000. Lara reported the donations as behested payments — the term for when California officials raise money from corporations or other groups and donate the money to nonprofits.
Lara separately reported a $15,000 behested payment in 2019 from the Western States Petroleum Association, an oil and gas lobbying group, though records show the donation was refunded.
Given these connections to fossil fuel and insurance interests, it’s not surprising that Lara has failed to continue Jones’s agenda, Court said.
“In politics, you don’t want people with big money angry at you. But in order to accomplish progressive ends, you often have to anger them, and Ricardo Lara doesn’t have that type of guts,” Court said.
“Ignoring the Elephant in the Room”
That’s not to say that the Department of Insurance under Lara has been entirely silent on climate. In July 2021, the department released a climate report containing recommendations for “policies to reduce the costs from wildfires, extreme heat, and flooding.”
The report contained numerous suggestions for mitigating the impact of climate change. But it was silent on ways that insurance regulation can be used to fight climate change directly. It did not mention the terms fossil fuels, oil, natural gas, or divestment. It also didn’t discuss the insurance industry’s investments in fossil fuels, and underwriting of fossil fuel projects, let alone how these activities might be curtailed.
“If you’re talking about insurance and climate change, and you don’t mention [insurers’] role in insuring fossil fuels, you’re willfully ignoring the elephant in the room,” Hammond said.
Lara is up for reelection this year, with the primary set to take place in June. So far, he has one opponent: Marc Levine, a member of the state assembly representing the Northern San Francisco Bay.
Levine hopes to return the Department of Insurance to the vigorous approach to climate matters it adopted under Jones. If elected, Levine told us that he would use regulation to require insurers to disclose their investments in fossil fuels and underwriting of fossil fuel infrastructure, and hopefully eventually move toward requiring insurers to divest from fossil fuels.
“We know what the powers of the commissioner can be, and how to make the most of them,” Levine said. “[Lara’s] refusal to act allows insurers to keep their complicity in global warming secret, and stifles any further action on climate risk.”
Lara is likely to be a formidable candidate, thanks in part to blanket support from the Democratic establishment. He has been endorsed by Governor Gavin Newsom, US senator Alex Padilla, and over a dozen members of California’s congressional delegation.
Levine started the race with a cash advantage of $1.8 million in campaign funds compared to Lara’s $329,000. But Lara now has the upper hand there as well, after a coalition including Equality California, Planned Parenthood Affiliates of California, and the California Federation of Teachers announced a $3 million independent expenditure on Lara’s behalf.
Lauding Lara’s work on behalf of consumers and on climate-related issues, the coalition’s press release announcing the expenditure also said that Lara’s election “as an out gay Latino son of immigrants has had a transformative impact on the lives of millions of Californians.”
While not denying that representation is important, Court worries that the question of whether or not Lara is providing the needed response to climate change is getting lost in the shuffle.
“California should be leading the way because we’re the most progressive state in the nation, with a mandate from the public to combat climate change,” Court said. “Yet we have a commissioner who’s not taking the lead, and who is unfortunately wanting to play ball with the insurance industry.”