Core Viewpoint - California's new legislation aims to limit hedge funds' ability to speculate on wildfire insurance claims, impacting the subrogation claims market significantly [1][4]. Group 1: Legislative Changes - The law, approved by Governor Gavin Newsom, voids transactions involving subrogation claims unless utilities are given the option to settle on the same terms [1]. - The new legislation introduces a right of first refusal for utilities, complicating the execution of trades for hedge funds [2][4]. Group 2: Market Implications - The law is expected to make it "a lot more difficult" for hedge funds to find and execute favorable trades, increasing the risk and uncertainty associated with subrogation claims [2]. - The market for subrogated claims is likely to "shrink" due to the introduction of non-disclosure clauses, which will hinder hedge funds' ability to price these deals effectively [4]. Group 3: Industry Concerns - There are growing concerns among Californians that hedge funds are profiting from devastating wildfires, which could undermine the California Wildfire Fund established to reimburse fire-related claims [3]. - The California Earthquake Authority has labeled subrogation bets as "opportunistic, profit-driven investment speculation" and is committed to addressing the activities of hedge funds in this area [3].