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Closing the Protection Gap from Both Directions

Insurance + Mitigation
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Residential Earthquake Insurance

• 1.1 Million Policyholders

• Publicly Managed/Privately Financed

• Not for Profit

Residential Earthquake Mitigation Grants

• Pre-1980 Homes/$3,000 Grant

• Retrofits to date: 11,000

• 2020 Goal: 4,400 Retrofits

California Wildfire Fund

• Coverage for Wildfires Caused by Investor Utilities

• $21 Billion Fund

• Overseen by California Catastrophe Response Council
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AG
4

Ratepayers $10.5 B Utilities $10.5 B

Ratepayer 

Surcharge

+

SoCal Edison

SDG&E

PG&E

California 

Wildfire Fund

$21 B

Coverage for Wildfires Caused by Investor Owned Utilities
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Narrowing the Protection Gap: Insurance

More Californians Choosing CEA

754,000 

775,000 779,000 

800,000 

811,000 

820,000 

841,000 841,000 

865,000 

879,000 

931,000 

1,021,000 

1,050,000 

1,111,000 

1,119,000 

700,000

750,000

800,000

850,000

900,000

950,000

1,000,000

1,050,000

1,100,000

1,150,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

Organic New Participating Insurers

2006–2015 average annual increase: 6,700

2016: 52,000

2017: 90,000

2018: 29,000

2019: 61,000

2020: 8,000*

*as of April 2020 
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Earthquake Vulnerabilities

Narrowing the Protection Gap: Mitigation

Cripple Wall Living-space-over garage

Hillside House Chimney
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Cripple Wall

Narrowing the Protection Gap: Mitigation

2014 South Napa M6.0 Earthquake damage

House shifted and dropped Cripple wall collapsed
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EBB Retrofit: Cripple Wall

Narrowing the Protection Gap: Mitigation

Several steps to the house

Crawl space vents 

and access door
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Cripple Wall Retrofit: Framing Clips, Foundation Plates, and Plywood

Earthquake Brace + Bolt

Crawlspace Before Retrofit

Plywood brace

Crawlspace After Retrofit

Foundation plate
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EarthquakeBraceBolt.com

11,000 Retrofits Over Last 5 Years

Grant recipients are not required to be a CEA policyholder 

CEA policyholders may be eligible for up to a 25% premium discount.
PROBLEM State funded mitigation grants 

potentially subject to federal taxation.

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12

State Funded Mitigation Programs

California Alabama

North Carolina South Carolina

Safe Home Program
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H.R. 5494: Catastrophe Loss Mitigation Incentive

and Tax Parity Act of 2019

Establishes tax exempt status for grants from state-funded residential mitigation 

programs for earthquake, windstorm and wildfire.

Sponsor:

Goal: Pass H.R. 5494 in 2020

Rep. Mike Thompson (D, CA)

Co-Sponsors: California

Rep. Aguilar (D)

Rep. Bera (D)

Rep. Brownley (D)

Rep. Calvert (R)

Rep. Chu (D)

Rep. Cisneros (D)

Rep. Cook (R)

Alabama

Rep. Byrne (R)

Rep. Rogers (R)

Rep. Sewell (D)

South Carolina

Rep. Rice (R)

North Carolina

Rep. Rouzer (R)

Wisconsin

Rep. Garamendi (D) Rep. Moore (D)

Rep. Gomez (D)

Rep. Panetta (D)

Rep. Sanchez (D)

Rep. Speier (D)

Rep. Swalwell (D)
OPPORTUNITY Enable CEA to provide approximately $50 million per 

year for natural catastrophe mitigation in California.

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Concept: Funding for Mitigation

1 in 50 2% $5.2 B

1 in 100 1% $8.6 B

1 in 150 .66% $11 B

1 in 200 .50% $13 B

1 in 250 .40% $14.9 B

1 in 300 .33% $16.3 B

1 in 350 .28% $17.7 B

1 in 400 .25% $19 B

CEA

Return Period Probability

2020

Estimated

CEA Loss

Reoccurrence of

Previous 

Earthquakes

2020

Claim Paying Capacity

1 in 400 Return Period

1 in 10 10% $630 M

1868

Hayward

$6 B

1994

Northridge

$8 B

1906

San Francisco

$13 B

>$1.3 B

1989 Loma Prieta

2014 Napa

2019 Ridgecrest

Capital

$6 B

Reinsurance

$9.2 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL

$19 B

$1.7 B CEA Claim Paying Capacity

Rating Agencies require CEA to meet an extremely 

conservative benchmark: enough claim paying 

capability for a 1 in 400 year return period.

For 2020, CEA must have access to $19 billion to pay 

for potential claims. The probability of incurring this 

much in covered claims is 1⁄4 of 1%.

To meet this benchmark this year, CEA will spend 

nearly $400 million in exchange for $9.2 billion of 

claim paying capacity.

Since opening in 1996, CEA has spent $5 billion for its 

reinsurance protection. Because California has not 

been hit by a catastrophic earthquake during that 

time, reinsurers have paid a total of $250,000 in 

reinsurance claims over that same period. 

15
Concept: Funding for Mitigation

CEA

Return Period Probability

2020

Estimated

CEA Loss

Reoccurrence of

Previous 

Earthquakes

2020

Claim Paying Capacity

1 in 400 Return Period

Concept

1868

Hayward

$6 B

1994

Northridge

$8 B

1906

San Francisco

$13 B

Capital

$6 B

Reinsurance

$9.2 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

>$1.3 B

1989 Loma Prieta

2014 Napa

2019 Ridgecrest

1 in 50 2% $5.2 B

1 in 100 1% $8.6 B

1 in 150 .66% $11 B

1 in 200 .50% $13 B

1 in 250 .40% $14.9 B

1 in 300 .33% $16.3 B

1 in 350 .28% $17.7 B

1 in 400 .25% $19 B

1 in 10 10% $630 M

Capital

$6 B

Reinsurance

$6.4 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.8 B

$19 B $19 B

Establish a new layer of a contingent 

capital, funded by a post-event 

assessment (maximum: 2%) on most 

property and casualty lines.

Excluding: Work Comp, Med Mal and 

Earthquake

Potential 

Assessment

%

Homeowners Insurance

Average Annual Premium: $1,000

Temporary Assessment $

Probability of any assessment being 

triggered is less than 1/3 of 1%.

In exchange for the Contingent Capital 

layer approximately $50 M/year

will be invested in earthquake and 

wildfire mitigation.

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Concept: Funding for Mitigation

CEA

Return Period Probability

2020

Estimated

CEA Loss

Reoccurrence of

Previous 

Earthquakes

2020

Claim Paying Capacity

1 in 400 Return Period

Concept

Potential 

Assessment

%

1%

1868

Hayward

$6 B

1994

Northridge

$8 B

1906

San Francisco

$13 B

>$1.3 B

1989 Loma Prieta

2014 Napa

2019 Ridgecrest

Capital

$6 B

Reinsurance

$9.2 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

1 in 50 2% $5.2 B

1 in 100 1% $8.6 B

1 in 150 .66% $11 B

1 in 200 .50% $13 B

1 in 250 .40% $14.9 B

1 in 300 .33% $16.3 B

1 in 350 .28% $17.7 B

1 in 400 .25% $19 B

1 in 10 10% $630 M

Capital

$6 B

Reinsurance

$6.4 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.8 B

$19 B $19 B

0%

$1.67 $20

Homeowners Insurance

Average Annual Premium: $1,000

Temporary Assessment $

$.83 $10

A reoccurrence of any of the 

most damaging earthquakes in 

California history would not 

trigger a post-event assessment.

Probability of a maximum 

assessment is 1⁄4 of 1%.

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CEA

Return Period Probability

2020

Estimated

CEA Loss

Reoccurrence of

Previous 

Earthquakes

2020

Claim Paying Capacity

1 in 400 Return Period

Concept

Potential 

Assessment

%

Homeowners Insurance

Average Annual Premium: $1,100

1868

Hayward

$6 B

1994

Northridge

$8 B

1906

San Francisco

$13 B

>$1.3 B

1989 Loma Prieta

2014 Napa

2019 Ridgecrest

Capital

$6 B

Reinsurance

$9.2 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

1 in 50 2% $5.2 B

1 in 100 1% $8.6 B

1 in 150 .66% $11 B

1 in 200 .50% $13 B

1 in 250 .40% $14.9 B

1 in 300 .33% $16.3 B

1 in 350 .28% $17.7 B

1 in 400 .25% $19 B

1 in 10 10% $630 M

0%

1%

Maximum Assessment

Annually: $11.00

Monthly: $0.91

Capital

$6 B

Reinsurance

$6.4 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.8 B

$19 B $19 B

Concept: Funding for Mitigation

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CEA

Return Period Probability

2020

Estimated

CEA Loss

Reoccurrence of

Previous 

Earthquakes

2020

Claim Paying Capacity

1 in 400 Return Period

Concept

Potential 

Assessment

%

Auto Insurance

Average Annual Premium: $1200

1868

Hayward

$6 B

1994

Northridge

$8 B

1906

San Francisco

$13 B

>$1.3 B

1989 Loma Prieta

2014 Napa

2019 Ridgecrest

Capital

$6 B

Reinsurance

$9.2 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

1 in 50 2% $5.2 B

1 in 100 1% $8.6 B

1 in 150 .66% $11 B

1 in 200 .50% $13 B

1 in 250 .40% $14.9 B

1 in 300 .33% $16.3 B

1 in 350 .28% $17.7 B

1 in 400 .25% $19 B

1 in 10 10% $630 M

0%

1%

Maximum Assessment

Annually: $12.00

Monthly: $1.00

Capital

$6 B

Reinsurance

$6.4 B

Bond Proceeds $1.1 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.8 B

Concept: Funding for Mitigation

$19 B $19 B

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Projection: Assuming 7% Exposure Growth

Capital

$6 B

Reinsurance

$8.9 B

Bond Proceeds $1.4 B

CEA Surcharge $1 B

IAL $1.7 B

$19B

Capital

$6 B

Reinsurance

$6.1 B

Bond Proceeds $1.4 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.8 B

$19B

Capital

$6.3 B

Reinsurance

$7.1 B

Bond Proceeds $1.4 B

CEA Surcharge $1 B

IAL $1.7 B

Contingent

Capital

$2.9 B

$20.4B

Capital

$6.6 B

Reinsurance

$8.5 B

Bond Proceeds $1.4 B

CEA Surcharge $1 B

IAL $1.4 B

Contingent

Capital

$3 B

$21.9B

Capital

$6.8 B

Reinsurance

$9.9 B

Bond Proceeds $1.4 B

CEA Surcharge $1 B

IAL $1.2 B

Contingent

Capital

$3.14 B

$23.4B

2020 Year 1 Year 2 Year 3 Year 4

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