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Claims-Paying Capacity
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Claims-Paying Capacity


The CEA has over $9 billion in claims-paying capacity.  Funds to pay claims come from earthquake-insurance premiums, contributions from and assessments on participating insurance companies, borrowed funds, reinsurance, and the return on invested funds.  The CEA does not pay federal income tax, and that tax status allows it to maximize the growth of its reserves.  The CEA receives no money through the state budget; state-budget deficits, therefore, have no impact on the CEA’s ability to pay its policyholders' claims.

How Would a Very Large Earthquake Affect CEA's Capacity to Pay Claims?

An earthquake scenario that would exhaust the CEA’s entire claim-paying ability is unlikely.

  • The CEA has about 800,000 policyholders located throughout the state.  Earthquakes are generally regional events, and any given seismic event is unlikely to affect all CEA policyholders.
  • CEA assets are available only to pay claims to homeowners and renters who have protected their homes by purchasing a CEA earthquake policy.  The CEA is not responsible for damage to commercial properties or to uninsured residential properties.
  • By law, the State of California is not liable for the CEA's liabilities, and the CEA does not pay any state liabilities.  Therefore, CEA assets are not used to repair infrastructure items such as bridges and freeways.
  • If an earthquake causes insured damage greater than the CEA’s claims-paying capacity, policyholders who are victims of that quake may be paid a prorated portion of their covered losses.  Or, the CEA Governing Board may approve installment payments.  The CEA is not permitted to file bankruptcy.