CEA Enters Capital Markets with $315 Million Bond Issuance
At its June 27 meeting, the California Earthquake Authority's (CEA) Governing Board approved the sale of $315 million worth of revenue bonds that will strengthen and diversify CEA's claim-paying capacity. The bonds, which are scheduled for sale in mid-July, are expected to be well received in the market due to the CEA's strong financial position and the investment grade ratings assigned to the bonds by two of the top investor rating services. Fitch Ratings assigned the bonds an "A" rating with a "Stable Outlook," while Moody's Investors Service rated them "A3." The California State Treasurer's Office is serving as the agent for sale, which is standard practice for bonds issued in California.
The high points of the bond transaction are:
New CEA Rates and Product Enhancements Starting July 1
On February 10, 2006, the California Department of Insurance (CDI) approved the CEA's application to modify its rates. The new rates represent a statewide average decrease of 22.1 percent. As a result, beginning July 1, 2006, approximately 85 percent of CEA policyholders will experience a reduction in their earthquake insurance rate. The remaining 15 percent of CEA policyholders' rates will increase or remain the same.
Additionally, the CEA has developed new product enhancements that allow CEA policyholders flexibility in matching coverages to their needs. Until now, the Personal Property and Loss-of-Use increased coverage limit options were sold only as a package. As of July 1, the CEA is unbundling these options and policyholders can choose coverage in any of the available supplemental amounts or combinations.
The CEA is also enhancing the Building Code Upgrade Coverage, which helps policyholders meet current building codes when they rebuild. The current CEA base policy features $10,000 for building code upgrades, but policyholders now have the option to buy an additional $10,000 in building code upgrade coverage, doubling the limit for that coverage to $20,000.
The CEA staff is taking steps to explain the new rates and products to policyholders and agents including:
The New CEA Estimated-Premium Calculator Now Online
The CEA's online Estimated-Premium Calculator now reflects new rates for all CEA policies, including those incepting or renewing on or after July 1, 2006. Visitors to the Web site at www.EarthquakeAuthority.com who seek information on CEA rates begin by selecting a policy type (Homeowner, Condominium, Mobilehome, or Renter) and then entering the policy's effective date. Depending on that date, the calculator automatically estimates annual premiums for the selected coverage options under the prior rates or the new rates that are effective July 1. The CEA calculator is designed to assist both agents and policyholders in understanding the new rates.
CEA Updates Online Training
The CEA places great value on continually educating agents, as well as claims professionals and other insurance company representatives who handle insurance matters on behalf of the CEA. Through May of this year, 417 insurance agents had completed the CEA's online training course. The CEA's free online agent training course, which earns two continuing education credits for California Property & Casualty license holders, has just been updated to include information about the new coverage limit options and can be found on the CEA Web site at www.EarthquakeAuthority.com under the "Helping Agents" link. The CEA also updated its "History of the CEA" course, which can be preveiwed at http://calquake.breezecentral.com/p57139197/.
Updated CEA Brochures Are Here!
The updated editions of our great collection of informative brochures are now on the shelves and ready for distribution. The CEA Homeowner, Mobilehome, Condominium and Renter brochures have been modified to reflect our recent rate changes and include a new mitigation fold-out section. Requests have already been filled for nearly 10,000 copies of the various brochures. Brochures are available free of charge and can be requested by calling CEA service representatives toll free at (877) 423-2322 or by emailing email@example.com.
Observance of 1906 San Francisco Earthquake Centennial Focuses On Need for Preparedness
This year the CEA was a driving force supporting many of the statewide events that took note of the centennial of the 1906 San Francisco Earthquake. Hundreds of entities joined the CEA as participants in the 1906 Centennial Alliance to remind Californians about the devastation caused by the historic San Francisco earthquake and encourage them to prepare for future seismic events.
The CEA was a significant participant and sponsor of education and mitigation-focused activities at the 100th Anniversary 1906 Earthquake Conference that was convened jointly on April 18-22 in San Francisco by the Governor's Office of Emergency Services, Disaster Resistant California, the Seismology Society of America, and the Earthquake Engineering Research Institute. The conference brought together an exceptional array of experts from the fields of earthquake science, seismic engineering, and community preparedness. The conference also featured extensive technical sessions and geological field trips. CEA staff made presentations, staffed a booth to answer questions about the CEA, and built relationships with other earthquake professionals working in preparedness and post-disaster response. The conference provided a focal point for dozens of yearlong earthquake education events involving the CEA including the following:
CEA Direct-Mail Campaign Receives Top Marketing Award
The CEA's 2005 direct-mail postcard marketing campaign recently received the highest honor from the Sacramento Chapter of the International Association of Business Communicators (IABC). The IABC's Crystal Award acknowledges the campaign's graphic design and execution as outstanding marketing work.
The CEA's campaign used oversized postcards designed to encourage policyholders to visit the CEA Web site to learn more about CEA product enhancements and earthquake preparedness. The postcard's graphic presentation and layout resonated with consumers, and helped propel an increase in call volume, Web site hits, and supplemental-coverage purchases.
Maximum Effectiveness is Goal of CEA Mitigation Programs
The CEA team is working on two remaining original mitigation pilot programs, which focus on teaching consumers how to protect themselves, their families, and their belongings from earthquake damage. The CEA's first pilot, that offered a rebate for buying mitigation products, has concluded. Preliminary analysis rated the pilot project successful, with results indicating that rebates appear to motivate consumers to take mitigation actions. CEA staff will report all results in a final report to be compiled once all three programs conclude at the end of this year.
The CEA is effecting a second round of Requests for Proposals to establish additional pilots to help guide the CEA in setting future long-term mitigation-program goals. An external review panel has reviewed the proposals submitted in response to our Request for Proposals 0506CS Earthquake Loss and Mitigation Pilot Projects: Personal Property Mitigation, and the CEA is now moving forward to perform further analysis of the practicability of the four proposals that scored highest and showed the most promise.
The CEA is also reviewing the responses received to Request for Proposals (RFP) #0507CS Earthquake Loss Mitigation Pilots: Retrofit of Residential Dwellings. A panel of subject-matter experts is reviewing all aspects of the proposals.
CEA staff will report results in a final report about all this year's programs to help guide the CEA in setting future long-term mitigation-program goals.
Computer Modeling for Predicting Earthquake Losses
The CEA is staying on top of the most advanced technology for earthquake preparedness and post-event response. This summer the CEA tested the EARLE (Early Loss Estimation) System developed by Exponent, Inc. The system incorporates existing earthquake modeling output and on-site fieldwork to create a process for providing estimates of probable losses quickly after earthquakes.
Because time is crucial in disaster response scenarios, a tool like EARLE could help the CEA and Participating Insurers respond promptly to the insurance recovery needs of policyholders. The EARLE system is unique in its application and represents the sort of innovation for which the CEA is becoming well-known around the world.
CEA Monitoring State and Federal Disaster Legislation
The CEA continues to monitor state and federal legislation, as well as proposals for new legislation such as the National Association of Insurance Commissioners' (NAIC) National Plan for Natural Catastrophe Risk. The NAIC plan is still under development and will see adjustments before Congress will decide whether to take it up, along with other competing proposals.
On the state level, CEA staff is monitoring a number of bills, including many that could affect the insurance industry generally, CEA participating insurers, or the CEA.
Legal Advisory - As a matter of its standard operating procedure and as part of its general compliance program, the CEA continually confirms that it complies with all applicable laws, regulations, and rulings, including those regarding insurance rating and pricing.
The CEA's use of information obtained from third parties is in compliance with applicable privacy laws and regulations.