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Climate risk and competition law: insurers must beware of coordinated retreat

August 2025

1. Introduction

In early 2025, a group of California homeowners filed a claim in Ferrier et al. v. State Farm Group 25STCV12117 (California Superior Court, Los Angeles County),  alleging that several of the largest US property insurers – including State Farm, Farmers, Travelers, and Allstate – coordinated their withdrawal from wildfire-prone regions, leaving consumers with no option but the state’s last-resort California FAIR Plan, which offers more expensive policies with less extensive coverage.

In a second case, Canzoneri v. State Farm Fire & Casualty Co. (California Superior Court, Los Angeles County), the claimant sought to commence a class action, collectively representing California homeowners.  In each action, the claimants seek treble damages, an injunction and other relief.

This is not simply a story about climate risk or coverage gaps. It is a competition law case: one that should send a clear warning to insurers globally: climate pressure does not exempt you from antitrust scrutiny.

On a global scale, this article draws out the lessons from Ferrier for all insurers, who face immense challenges from climate change.  There is a growing compliance risk for insurers operating in the UK and EU, who may be tempted to band together to avoid the huge liability caused by climate related loss and damage to insureds.

2. What Ferrier is really about

The central allegation in Ferrier is that insurers facing mounting wildfire losses collectively cancelled or declined to renew policies in high-risk zones (Malibu, Pacific Palisades, Altadena), effectively forcing homeowners into the FAIR Plan – a limited, higher-cost backstop product.

The legal theories underlying the claim are as follows:

• Group boycott: major firms withdrawing together from a particular customer group or geographic area.
• Market allocation: a tacit understanding not to compete in certain regions.

The complaint argues this behaviour protected insurers from concentrated losses while pushing risk and cost into a public pool. If proven, it would constitute a per se violation of US antitrust law (S 1 of the Sherman Act 1890).

3. Is the law the same in Europe as the US?

The same conduct complained of in Ferrier would also infringe UK and EU competition law (S2, Chapter I of the UK Competition Act 1998 (CA 98) and Article 101 TFEU).  These provisions prohibit any anti-competitive agreement or concerted practice:

• If there is an anti-competitive agreement, an investigating authority or claimant would need to show a “meeting of minds” for two or more insurers to boycott certain types of cover; and

• a concerted practice can arise where one insurer merely discloses its future intentions to another (e.g. to stop providing cover for a certain type of risk or raise premiums). This can actually implicate both the disclosing party and the recipient in illegal conduct.

The decision of the UK Office of Fair Trading in RBS / Barclays (2011) shows how easily a concerted practice can occur.  RBS was fined because one of its employees divulged to employees of Barclays RBS’ future plans regarding SME banking product pricing and timing.  UK/EU law generally treats certain forward-looking information exchanges as restrictions “by object” — so proof of harm is not needed. The CMA found that such exchange reduced strategic uncertainty and could distort competition (even in the absence of a wider plan).  The case sent a clear message about the risks of sharing information about future intent.

Readers may be aware that the CMA recently issued its Guidance on environmental sustainability agreements and competition law (October 2023).  This clarifies how competitors can lawfully collaborate on environmental or climate-related initiatives without infringing Chapter I prohibitions.

The CMA recognises that certain agreements pursuing genuine environmental objectives may fall outside the Chapter I prohibition, or may benefit from exemption where pro-competitive and environmental benefits outweigh any restriction of competition.

However, the CMA is clear that this is not a blanket safe harbour: agreements that amount to market allocation, coordinated withdrawal from markets, or collective underwriting restrictions remain prohibited unless they satisfy strict exemption criteria.

Clearly, the conduct alleged in Ferrier would – even on the CMA’s own slightly more generous approach – be unlawful.  Ferrier alleges an anti-competitive conspiracy which has directly harmed direct customers in the form of reduced product choice and higher prices.  This conduct would not assist in combating climate change and in fact leave consumers more exposed to its adverse effects.

4. Are UK and European insurers facing the same pressures related to climate change?

UK and EU insurers are under similar pressures to their counterparts in the US. Flood exposure in Cumbria, subsidence in southern Europe, coastal erosion around Norfolk.  These are known risks, with rising claims frequency and reinsurance costs. Insurers are reviewing their geographic exposure and, in some cases, pulling back from markets altogether.

Insurers are at liberty to discontinue offers for cover for certain types of risk.  However, coordinated action for insurers to collectively stop may well infringe competition law.

The risk of such coordination is high for this sector.  Insurers operate in a highly networked environment. The following forms of cooperation are generally lawful if carefully structured:

• Share exposure data with industry peers;
• Participate in risk pools and joint reinsurance schemes;
• Discuss underwriting pressures in trade bodies;
• Benchmark pricing and appetite against competitors.

This necessary coordination increases the risk that parallel decisions will appear coordinated, even if they are not. And regulators will presume coordination where conduct is aligned and no independent justification is documented.

5. Does this mean all contact with our competitors is banned?

Not at all.  There are entirely legitimate reasons for insurers to work together.  Certain forms of cooperation are lawful – indeed, essential to the functioning of insurance markets. The key is whether the cooperation restricts competition and customer choice (e.g. because a specific risk is too large for one insurer to take on alone) or enhances it.

Whilst legal advice is always needed, legitimate cooperation could include the following:

• Participation in state-mandated risk pools: Schemes like Flood Re, Pool Re or the Motor Insurers’ Bureau have not been investigated by the CMA likely because they exist under legal compulsion or regulatory design.
• Shared actuarial models and catastrophe data: Insurers may use common loss models, geospatial tools, and historical catastrophe data from neutral third-party sources (e.g. RMS, PERILS). What is prohibited is agreeing how to use that data commercially (e.g. “we’ll all stop writing Zone 3 based on this”).
• Reinsurance syndication and layering: Where risk is too large to be underwritten by one carrier, syndication and reinsurance layering (especially in Lloyd’s or facultative markets) is legitimate, provided there’s no coordination on retail pricing or underwriting appetite outside the transaction.
• Regulatory engagement and stress test feedback: Joint representations to regulators, industry consultations (e.g. on Solvency II or climate disclosure), and responses to EIOPA or PRA stress testing are permitted – so long as they do not veer into strategic coordination or shared commercial intentions.
• Claims fraud initiatives and subrogation agreements: Anti-fraud information exchange and inter-insurer recovery schemes (e.g. ABI’s Netting Agreement) are long-standing exceptions, where the objective is efficiency and fraud deterrence rather than limiting market access or pricing.  Similarly, Stop Scams UK is a membership organisation of businesses from across banking, technology and telecoms dedicated to promoting best practice to prevent identity theft and cybercrime.

The line is crossed when such forums become vehicles for market signalling, strategic alignment, or the suppression of competition. Insurers must police the purpose, content, and minutes of any industry meeting or shared initiative.

6. Not their first rodeo: net zero initiatives also triggered concerns

The California wildfire litigation is not the first time insurers have found themselves caught between climate risk and competition law. In 2023, the Net Zero Insurance Alliance (NZIA) – a high-profile UN-backed coalition of global insurers committed to aligning their underwriting portfolios with net zero by 2050 – collapsed under political and legal pressure, particularly in the United States.

The NZIA had attracted scrutiny from US State Attorneys General, who alleged that coordinated commitments to restrict underwriting of fossil fuel projects could amount to collusion under federal and state antitrust laws. This legal pressure led a number of major players to exit the Alliance, including Munich Re, Lloyd’s, AXA, and Allianz.  In separate actions, other Net Zero Alliances have been targeted, including the Net Zero Banking Alliance.  Whilst not accepting the original Alliances were problematic, the UN has acted to reform the Net Zero collaboration in order to address any antitrust concerns that could arise.

The Net Zero cases raise a number of complex issues, which we will discuss in a separate piece that will also explore the CMA’s guidance.

7. Conclusion

Ferrier and Canzoneri show that when insurers act in sync – especially under stress – the risk of antitrust exposure is real. The climate is changing, but the law has not. Withdrawal from difficult markets must be commercially justified and legally defensible on an individual basis.

In the UK and EU, the CMA, FCA, and European Commission will scrutinise coverage restrictions and market exits closely – particularly where multiple insurers withdraw from vulnerable regions simultaneously. As the economic strain of climate change grows, so too does the legal risk of collective retreat.

The key rules are clear:

1. Do not discuss future strategy (including pricing, coverage scope, or withdrawal plans) with competitors – formally or informally.
2. Avoid using trade bodies or joint industry groups to share strategic outlooks or create pressure for collective action.
3. Treat underwriting appetite as competitively sensitive, even in difficult market conditions.
4. Maintain an internal audit trail for any material withdrawal or coverage change:
   • What data triggered the decision?
   • Who approved it?
   • Was it made in response to your firm’s own loss experience and risk modelling?
   • Can you prove it would have been made regardless of competitor behaviour?
5. Don’t rely on competitor conduct as cover. A wave of market exits may reflect shared commercial logic, but unless your decision is demonstrably independent, it may be viewed as coordinated.

Insurers cannot afford to get this wrong. The solution is simple, but non-negotiable: make your decisions alone, record them well, and say nothing about them to your competitors.  Where collaboration with insurers may be legitimate or where an insurer realises it has been involved in conduct that may be unlawful, legal advice must be taken without delay to assess your best options.

If you have any questions about the topics raised in this article, please get in touch with the author.

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