CEA RELEASES NEW REPORT

A new report completed by Tillinghast-Towers Perrin presents the current state of the California Earthquake Authority (CEA) in a positive light. The “CEA Project Consulting Team Report” was commissioned by the CEA Governing Board to analyze the entity’s current structure and operations and recommend changes. The goals include: “strengthening the financial structure, survivability and sustainability of the CEA; protecting the CEA against adverse selection; making earthquake insurance widely available; [and] optimizing the CEA’s Governing Board and staff structure.” Since its inception, the main focus of the CEA has been on having “sufficient claims-paying capacity to provide protection to its policyholders for the worst case scenario, a significant earthquake,” according to the report. “The CEA is currently well-positioned in this regard, with an estimated current capacity to handle on an aggregate basis a 1 in 1,000-year loss. In other words, for the current policyholders there is less than a 0.1% probability of a CEA default.” The long-term sustainability of the CEA is a theme of the report, which stated: “A significant earthquake event or series of smaller events could impact the ability of the CEA to acquire additional capacity to continue. The key to maintaining sufficient capacity for the long term is to examine and evaluate alternatives to the current financial structure that enhance and protect its current capital base, grow that capital base at a faster rate over time, and provide additional sources of capacity on either a pre-event, or contingent post-event funding basis.”

Topics Earthquake