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California Earthquake Authority July 2010

California Earthquake Authority July 2010. Glenn Pomeroy Chief Executive Officer. California. 99% chance of a major earthquake (M6.7) within the next 30 years. Majority of Californians live within 20 miles of a major fault. CEA Today….

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California Earthquake Authority July 2010

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  1. California Earthquake Authority July 2010 Glenn Pomeroy Chief Executive Officer

  2. California • 99% chance of a major earthquake (M6.7) within the next 30 years. • Majority of Californians live within 20 miles of a major fault.

  3. CEAToday… • Largest provider of earthquake insurance in the United States • More than 800,000 policies in force • Writes 70% of all California residential earthquake insurance policies

  4. CEA Governance Assembly Speaker Senate Rules Chair Treasurer Voting members Non-voting members

  5. CEA Claims paying capacity Current Financial Structure Participating Insurer Assessments $2.8B $0.3B Revenue Bonds Reinsurance $3.1B CEA Capital $3.6B Claims Paying Capacity 1-in-545 year event Total: $9.8B

  6. Problem Only 12% of residents with homeowners insurance have earthquake coverage. coverage. Uninsured Insured

  7. Barriers to purchasing EQ insurance • High-priced premium • High-percentage deductible

  8. More than 40% of CEA policyholder premiums spent on reinsurance 1997-2009: Total policyholder premiums $6 billion Reinsurance Costs $2.5 billion Spent on reinsurance $2.5 billion Capital $2.4 billion Reinsurance claims paid: $250,000 *Expenses $1.1 billion • *Major Expense Categories • Agent Commissions • Debt Financing • Participating Insurer Fees • CEA Operations

  9. COGA allows future CEA growth • Double take up rate over 5 years • Enhance financial strength • Probability of need to borrow – less than 1% Post-Event Borrowing $10 Billion Post-Event Borrowing 2010 Participating Insurer Assessments Participating Insurer Assessments $2.64 B Revenue Bonds Participating Insurer Assessments Revenue Bonds $.3 B COGA FUTURE Reinsurance Revenue Bonds Reinsurance $3.2 B Reinsurance CEA Capital $3.6 B CEA Capital CEA Capital Total $9.8 B

  10. Federal Legislation: S.886: • Catastrophe Obligation Guarantee Act • Florida: Bill Nelson • California: Dianne Feinstein and Barbara Boxer • Louisiana: Mary Landrieu • Catastrophe Obligation Guarantee Act of 2009 • California: Loretta Sanchez, Howard Berman, John Campbell, Lois Capps, Judy Chu, Jim Costa, Susan Davis, Sam Farr, Bob Filner, John Garamendi, Michael Honda, Barbara Lee, Zoe Lofgren, Jerry McNerney, Grace Napolitano, Laura Richardson, Lucille Roybal-Allard, Linda Sanchez, Adam Schiff, Brad Sherman, Jackie Speier, Fortney Stark, Mike Thompson, and Lynn Woolsey • Louisiana: Charlie Melancon • Homeowners’ Defense Act of 2009 • Ron Klein (FL) and others • - National Catastrophe Risk Consortium • - COGA (Title II) • - Federal reinsurance • - Mitigation H.R.4014: H.R.2555:

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