Senate Bill 222 – The Path to Recovery?

Article by Niki Saberi Oskoui

In January 2025, the state of California unveiled Senate Bill 222 (SB 222) as part of the Affordable Insurance and Climate Recovery Act, marking a bold attempt to tackle skyrocketing insurance premiums which have been exacerbated by recent wildfires. If passed, this legislation would allow insurance companies to recover losses from climate-related disasters from oil and gas companies.

By shifting the financial burden from Californian policyholders to fossil fuel companies, identified by lawmakers as contributors to climate change, the Bill aims to address challenges within the state’s insurance market. While the extent of this private right of action remains ambiguous, its purpose is clear: enabling insurers to recover damages paid for climate-related catastrophes to mitigate rising premiums.

A lifeline for the FAIR Plan

The legislation may have consequences for the state’s Fair Access to Insurance Requirements (FAIR) Plan, originally created as an insurer of last resort. Under SB 222, independent experts could assess whether potential litigation against oil and gas companies might outweigh its costs. If deemed viable, FAIR Plan administrators could initiate lawsuits on behalf of policyholders, seeking financial restitution for losses tied to climate disasters.

In broader terms, SB 222 aims to stabilise the insurance market by allowing both private insurers and the FAIR Plan to reclaim losses from fossil fuel companies, effectively restoring balance to a system under strain.

California’s insurance crisis

Between 2020 and 2022, 2.8 million homeowner policies were not renewed, with more than half a million occurring in Los Angeles County. Climate-related disasters have led to increasingly rising insurance costs, forcing many people into the FAIR Plan, once meant to be an insurer of last resort. The continual climbing cost of such disasters has, in turn, caused higher prices for insurance policyholders.

The crisis has intensified with California’s recent wildfires, displacing over 200,000 people and leaving behind an estimated $250 billion in total damage.

Insurance losses for property damage, temporary housing, and related claims are projected to range between $35 billion and $45 billion, potentially cementing this disaster among the costliest in U.S. history. Of the 31,000 claims filed, California insurers have already paid out more than $4.2 billion. The ripple effects are global, with European reinsurers expected to absorb approximately $1 billion in losses.

Broader implications

SB 222 follows a recent decision by the U.S. Supreme Court in Sunoco v. Honolulu, which upheld lawsuits from Hawaii, California, and other states seeking damages from oil companies for climate-related harm. The retroactive nature of SB 222, extending liability back to 1965, is expected to ignite legal challenges, with critics calling the Bill an invitation for endless litigation.

Many have argued that SB 222 is a vital step to ensure Californians and the insurance market are not left footing the Bill for the economic fallout of climate change. Detractors, such as Rock Zierman, CEO of the California Independent Petroleum Association, dismiss the Bill as an attempt to deflect blame for the destruction caused by wildfires.

A model for other states?

If successful, SB 222 could serve as a template for similar recovery efforts in states like Texas, Louisiana, and Florida, which are grappling with severe weather events. While its passage faces opposition from fossil fuel industry lobbyists and business groups wary of litigation costs, California lawmakers view the Bill as an essential intervention to shield consumers from soaring insurance prices and to set a precedent in the fight for climate accountability.

As SB 222 navigates the legislative process, it holds the potential to reshape how states address the financial impacts of climate change, offering a glimmer of hope amid rising insurance costs and increasingly devastating natural disasters.