It all started with an earthquake
On January 17, 1994, a 6.7 magnitude earthquake rocked California's San Fernando Valley on a fault no one even knew existed. After the dust settled, it was the costliest earthquake in U.S. history.
The Northridge earthquake shook the foundation of the residential insurance industry. The industry had greatly underestimated the potentially huge costs associated with damage from even a moderate earthquake.
As a result, insurance companies cut back on writing homeowners policies
Under the mandatory offer law, insurance companies are required to offer earthquake insurance whenever they sell a homeowners policy. Fearing that they wouldn't have enough money to pay damage claims to homeowners if another Northridge-like quake hit, many insurance companies vastly limited the number of homeowners policies they wrote.
By January of 1995, companies representing 93 percent of the California homeowners insurance market had either restricted or stopped writing homeowners policies altogether, sending the California housing market into a tailspin.
The "mini policy" was created
In 1995, the California Legislature came up with a workable solution it thought would help revitalize the insurance and housing markets. It created a basic, no-frills "mini policy" that any insurer could sell to comply with the mandatory offer law. The mini policy provided homeowners basic coverage for the roof over their heads, eliminating costly extras like swimming pools and patios.
CEA is born
In 1996, the California Legislature went one step further and created the California Earthquake Authority (CEA) – a publicly managed, privately funded entity. Residential property insurers could offer their own earthquake insurance or become a CEA participating insurance company.
CEA has worked with many well-known insurance companies for nearly 20 years. Today, about 75 percent of California residential property insurance companies offer CEA earthquake policies. By selling our policies exclusively through these participating insurance companies, CEA has become one of the largest providers of residential earthquake insurance in the world.
A focus on earthquake safety, education, awareness and low rates
CEA places a high priority on educating California homeowners and renters about how to stay safe during an earthquake, and how to reduce the risk of earthquake damage and loss.
We work with a number of organizations such as the California Office of Emergency Services (CalOES), Earthquake Country Alliance (which created The Great California ShakeOut™), joining forces with the American Red Cross, and working with United Policyholders.
Our collaborative efforts have helped make Californians more aware of their earthquake risk and become better prepared for the next big one.
The CEA is financially strong, with over $13 billion in claim-paying capacity. Most importantly, CEA has worked to reduce earthquake insurance rates over the years to make coverage as affordable as possible for every California resident.