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Our Financial Strength

More than $19 billion in claim-paying capacity

When it comes to financial strength, California Earthquake Authority (CEA) is on solid ground:

  • Largest provider of residential earthquake insurance in the U.S.
  • Provides two-thirds of the residential earthquake insurance policies sold in California.
  • More than 1 million policies in force.
  • Annual premium revenue more than $915 million.
  • Over $19 billion in claim-paying ability.

CEA's financial strength has been rated as A– (Excellent) since 2002 by A.M. Best Co., the world's oldest and most authoritative rating agency of insurance companies.

Where does a premium dollar go?

Most of the funds CEA collects from premiums are reinvested into the business of insuring policyholders, not overhead. By law, only 6 percent of CEA's premium income can be spent on operating expenses.

Most of the funds CEA collects from premiums are reinvested into the business of insuring policyholders, not overhead. By law, only 6 percent of CEA's premium income can be spent on operating expenses.

CEA is not-for-profit, privately funded

CEA is a not-for-profit, privately funded, publicly managed organization that provides residential earthquake insurance and encourages Californians to reduce their risk of earthquake loss. 

  • CEA only offers residential insurance.
  • Our assets are available only to pay claims to homeowners and renters who have protected their homes by purchasing a CEA earthquake policy.
  • As a not-for-profit, CEA does not pay federal income tax, so our reserves used to cover claims can grow more quickly.
  • CEA is actuarially sound, which means we have been deemed by financial experts to have sufficient funds—more than $19 billion—to pay claims from even a devastating earthquake.

Financial Information

View our most commonly- asked financial questions. If you have more questions about our financial structure or claim-paying capacity, read the CEA Financial Overview.
Q. Is CEA financially sound?
A.  Yes. CEA has an A- (Excellent) rating from A.M. Best Co., the world's leading rating agency of insurance companies. 
Q. Could CEA pay all of its claims if there is an earthquake?
A. CEA has a claim-paying capacity of more than $19 billion. CEA could cover all claims if the 1906 San Francisco, 1989 Loma Prieta, or 1994 Northridge earthquake reoccurred today. 
Q. What happens if an earthquake(s) exceeds CEA’s claim-paying capacity?

A. We will settle claims on a pro rata basis. By way of simple example, if CEA has enough claim-paying capacity to only cover 90% of all covered claims, CEA policyholders would receive payment for 90% of their covered claims. A more sustainable structure would need to be approved by the California State Legislature in order for CEA to remain in business following such an event.

Keep in mind that CEA has historically been very conservative in establishing our claim-paying capacity. The goal has been to make sure CEA will be able to pay 100% of covered claims in the aftermath of a catastrophic earthquake far more damaging, and much less likely, than any earthquake in California’s history.

CEA’s current claim-paying capacity is set at 1-in-350, which means there is only a 0.29% chance that CEA would not be able to pay 100% of all claims should an earthquake, unprecedented in it damage, occur.

Q: Is CEA part of the state budget?
A: CEA is a privately financed entity and receives no money from the State of California budget. California’s budget concerns have no impact on the CEA’s ability to pay its policyholders’ claims. By law, the State of California is not responsible for the CEA's liabilities, and the CEA does not pay any state liabilities. Therefore, CEA assets cannot be used by the state for any government purposes such as repairing infrastructure items like bridges and freeways. 
Q: The 1994 Northridge Earthquake caused about $20 billion in residential damage, but CEA has only $19 billion in claim-paying capacity. How can you cover all the claims after a major earthquake?

A: CEA would have liability only for a defined portion of the total cost of the economic damage caused by a major California earthquake, because CEA assets are available only to pay claims of homeowners and renters who have protected their homes and possessions by buying a CEA earthquake insurance policy.

Put another way, like any insuring entity, CEA is responsible for paying its insured losses, not the total cost of all the damage. CEA claim-paying capacity is carefully established according to financially conservative standards: CEA aims to maintain a claim-paying capacity sufficient to pay 100% of CEA’s annual claims 99.71% of the time—or only a 0.29% chance that CEA would not be able to pay 100% of its claims should an earthquake, unprecedented in it damage, occur. In addition, it is important to bear in mind that CEA is not responsible for losses to uninsured residential properties or their contents, commercial properties, or public infrastructure such as bridges and freeways.

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