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- ■ Berkshire's Roundtrip Fire Risk
- ■ Short Tags Kinsale a "Cult"
- ■ California Model Rush
Berkshire Hathaway Wildfire Exposure Continues To Burn
Berkshire Hathaway's Q2 2025 earnings show the Omaha-based conglomerate continues to grapple with wildfire exposure across multiple holdings, as both its energy subsidiary PacifiCorp and its insurance operations face escalating billion-dollar costs from catastrophic blazes.
The dual exposure reveals the increasing interconnected risk of climate and physical hazards that threatens the balance of Buffett's beloved insurance "float," as wildfire insurance claims in California combine with debates over power-line-driven fires reportedly attributed to Berkshire-owned utility infrastructure.
The conglomerate reported $1.1 billion in fresh wildfire losses during the first six months of 2025, primarily from Southern California wildfires that struck in the first quarter.
These new catastrophe events impacted multiple Berkshire insurance units, with BH Primary absorbing approximately $300 million in wildfire losses and Berkshire Hathaway Reinsurance Group facing $760 million in claims.
Meanwhile, PacifiCorp—Berkshire's utility subsidiary operating across six western states—continues to battle a mounting legal crisis stemming from 2020 and 2022 wildfires.
The utility has recorded cumulative estimated probable losses of $2.75 billion before taxes and expected insurance recoveries, with $1.37 billion already paid in settlements through June 30, 2025.
Legal Developments
PacifiCorp's wildfire litigation has reached a critical juncture following mixed investigative findings. While federal investigators concluded the utility's power lines caused the devastating Archie Creek and Slater fires, a March 2025 Oregon Department of Forestry report provided crucial exculpatory evidence.
The state investigation found that PacifiCorp's power lines did not contribute to the overall spread of fire into the Santiam Canyon, determining instead that embers from a pre-existing Beachie Creek Fire caused 12 fires within the canyon.
Despite this favorable development, legal pressures continue mounting for the utility.
Between April 2024 and May 2025, seven mass complaints were filed naming 1,690 individual class members, with damages awarded across multiple jury verdicts now totaling $370 million. The utility faces "supersedeas" bonds and 9% annual interest accruing on judgments during the appeals process, which could extend several years.
The federal government has also entered the fray, with the United States filing a complaint in December 2024 demanding damages estimated to exceed $900 million for alleged costs on federal and state lands.
Regulatory and Rate Recovery Challenges
According to Utility Dive, PacifiCorp is attempting to recover approximately $1.7 billion in wildfire-related liabilities through transmission rates, facing fierce opposition from Utah-based power providers who filed a complaint with the Federal Energy Regulatory Commission.
The challengers argue that allowing PacifiCorp to shift "massive liabilities from shareholders to ratepayers without a finding that PacifiCorp acted prudently" would create illegal rate shock and violate federal law.
In addition, Berkshire Hathaway has launched a coordinated multi-state legislative campaign to shield utilities from wildfire liability, according to E&E News by POLITICO.
Warren Buffett and his designated successor Greg Abel have made clear that continued investment in PacifiCorp states depends on legislative and regulatory reforms limiting wildfire exposure.
Financial Outlook
Berkshire recorded no new wildfire loss accruals during the first six months of 2025 for PacifiCorp, despite ongoing litigation, suggesting management is confident that its current $2.75 billion reserves are adequate.
However, the most recent filing acknowledges that "it is reasonably possible PacifiCorp will incur significant additional losses beyond the amounts currently accrued."
The geographic concentration of PacifiCorp's operations in California and Oregon, states experiencing increasing wildfire frequency and severity, creates ongoing exposure that legislative reforms may only partially mitigate.
With $530 million in insurance recoveries already exhausted and no additional coverage expected, Berkshire faces the full cost of future wildfire liabilities across both its energy and insurance portfolios.
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The insurance sector faces new AI oversight as the Bermuda regulator eyes modeling risks. - Federal Climate Report Challenges Insurance Industry's Extreme Weather Risk Models
A controversial Department of Energy report questioning the scientific basis for predicting worsening extreme weather events has put the federal government at odds with insurance industry assumptions.
Short Questions Kinsale's E&S Chops
Kinsale Capital Group (NYSE: KCCB), the specialty insurance company currently trading at seven times book value and more than triple the industry benchmark, has caught the short thesis eye of PAA Research.
