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CEA expects $30mn reinsurance cost cut in 2019


The California Earthquake Authority (CEA) expects to save $30mn in reinsurance costs this year with the passage of AB2927, which would change California law to allow the CEA to access nearly $1bn in additional capital to stabilise rates and growth. 

This bill would work by levying a surcharge on existing policyholders in the case of a major seismic events that exhausts the CEA’s other sources of capital.  

The $30mn in expected savings were presented in the CEA’s executive report submitted by CEO Glenn Pomeroy, according to the agenda from the governing board meeting held on Wednesday. 

By year end 2018, the CEA’s reinsurance program reached $8.1bn. This is 10.1 percent higher than last year and 69 percent above the level in 2013. 

The privately funded non-profit that sells Californian earthquake insurance policies through participating insurers paid $366mn, representing 4.5 percent rate on the line, for its 2018 coverage. This compares to 4.3 percent rate on the line in 2017. 

The $8.1bn in risk transfer protection is about 50 percent of the organisation’s claims-paying ability as of year end 2018. It sits above $5.66bn in available capital. It also has $2.35bn of further claims paying capacity in the form of revenue bonds and post-event industry assessments. 

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