1 pcs turkey symposium istanbul 27 may 2015 dan dyce cpcu rpa pcs turkey symposium istanbul 27 may...
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• PCS Turkey Symposium• Istanbul 27 May 2015• Dan Dyce CPCU RPA
Why does California have a CEA?
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$0
$1,000
$2,000
$3,000
$4,000
0
1000
2000
3000
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1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
Lo
ss
es
in
Mil
lio
ns
Losses
Premium
Years
1984 Mandatory
Offer
Aftermath: • Most companies wished to cease
writing EQ insurance
• Since mandate required companies to offer EQ insurance most companies ceased writing new homeowners policies
1996: CEA created to fix broken homeowners insurance market
After Northridge, California had aBroken Homeowners Insurance
Market
4Property of the California Earthquake Authority (CEA)
Privately Financed
5Property of the California Earthquake Authority (CEA)
Historical Sources of CEA Funding
Policyholder premium: $9.0B
Participating Insurer Capital Contribution: $777 M
Policyholder Premium tax: $210 M
1996-20146Property of the California Earthquake Authority (CEA)
865,000 Policyholders
$11.8B in claim paying capacity
Strong financial ratings
Able to pay all covered claims if Northridge x2 occurred today
However: 90% of California homes are uninsured for earthquake damage
Financial Strength
Capital $4.7B
Risk-Transfer $4.5B
Revenue Bonds $662M
2nd IAL $1.65B
New IAL $312M
Total: $11.8B
As of 1/1/2015
CEA Claim-Paying Capacity
7Property of the California Earthquake Authority (CEA)
A Costly Reliance on Reinsurance
Capital $4.7B
Risk-Transfer $4.5B
Revenue Bonds $662M
2nd IAL $1.65B
New IAL $312M
Total: $11.8B
As of 1/1/2015
CEA Claim-Paying Capacity
1996 – 2014: 40% of CEA-Policyholder Premium has been spent on reinsurance
Earthquake insurance premium: Paid by CEA policyholders to CEA…....... $9.0 Billion
Reinsurance premium: Paid by CEA to reinsurers……….…....…... $3.7 Billion
Reinsurance claims:Paid by reinsurers to CEA……........…………$250,000
2015 risk transfer expense……….$210 Million
8Property of the California Earthquake Authority (CEA)
CEA Policy Count: 1998-2014
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014600,000
650,000
700,000
750,000
800,000
850,000
900,000
950,000
1,000,000
912,173
881,719
829,951819,502
768,808
724,722 727,675
751,767
754,672
775,464
779,362
800,930811,317
820,932
841,503
841,836
865,084
CEA policy count has grown by 19% over the last 10 years
As of 12/31/2014
9Property of the California Earthquake Authority (CEA)
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 20130
200
400
600
800
1000
1200
1400
1600
Holding Premiums Down
*Rates based statewide weighted average Homeowners Average Coverage A Value
No rate reductions/Reconstruction costs up 137%Rate reductions/Reconstruction costs up 137%
$1402
$743
$576
11% Rate Decrease
No rate reductionsReconstruction cost increase
Rate reductions have held the line on premium
increases
Average CEA Premium
Rate reductions Reconstruction cost increase
12.5% Rate
Decrease
Reconstruction costs have risen 137% since 1996
23% Rate Decrease
10Property of the California Earthquake Authority (CEA)
Participating Insurers Role
• Before an earthquake– Underwrite policy– Issue policy– Collect premiums and remit to CEA
• After an earthquake– Policyholder reports claim to carrier– Adjust claims - quick, consistent & fair– Disburse claims payments– CEA reimburses them 100% + handling fee
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No Underwriting
• If a Participating Insurer will take the risk, the CEA will take the risk.
• Only underwriting criteria is:– No unrepaired previous structural earthquake
damage– CEA writes 1 to 4 unit residential structures
Available Coverage
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Coverage
Structure
Deductible
Personal Property
Loss of Use
Emergency Repair
Mitigation Discount
1-1-2016
Full amount
5,10,15,20,25%
Up to $200,000
Up to $100,000
No deductible on first $1,500
Up to 20%
USA Federal Aid is Limited
After a presidential catastrophe declaration…• FEMA– Up to $30,000
• SBA– Low interest loans
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California Residential Mitigation Programwww.californiaresidentialmitigationprogram.com
• CRMP is a JPA created by the CEA and the Governor’s office of emergency services
• Grants up $3,000 to seismically retrofit a home
CEA Claims Process
17Property of the California Earthquake Authority (CEA)
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CEA Claims Paid History
• Date M Location # of paid claims $$ paid• 11/16/1999 7.0 Palm Springs 25 $ 149,724.28• 09/03/2000 5.2 Napa 15 $ 303,161.78• 09/9/2001 4.2 West Hollywood 10 $ 73,078.09• 12/22/2003 6.4 San Simeon 84 $2,934,967.76• 07/29/2008 5.4 Chino Hills 8 $ 159,056.27• 04/04/2010 7.2 Baja Mexico 17 $ 88,362.58• 03/28/2014 5.1 La Habra 82 $ 373,014.11• 08/24/2014 6.0 Napa 167 $ 1,154,894.86
CEA/PI Claims Liaison
Claims Liaison• Each PI has appointed one experienced Property
Claim Manager as their CEA Claims Liaison. Each Claim Liaison has a back up.
• Primary contact point for all CEA claim processing interaction between the CEA and the PI.
• Allows the CEA to hold a person with authority at each PI quickly accountable for claims handling.
19Property of the California Earthquake Authority (CEA)
Annual CEA Claim Liaison Training
• CEA Claim Liaisons must attend the annual full-day CEA claims manager conference where duties and claim handling expectations are communicated and reinforced.
• PI claim management teams attend as well.
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Participating Insurer Agreement
SECTION 6.3 The Participating Insurer shall handle all Authority Services with a level of diligence substantially equivalent to that which it applies to its own services as a voluntary insurer…
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CEA Claim Manual
The CEA has a comprehensive CEA Claim Manual that our PIs are required to follow.
www.earthquakeauthority.com.
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CUREE Inspection Guidelines
The CEA requires PIs to be familiar with and use the CUREE General Guidelines for the Assessment and Repair of Earthquake Damage in Residential Woodframe Buildings.
– Occupant questionnaire– General inspection checklist– Attic inspection checklist– Crawlspace inspection checklist
• Funded by CEA but independentlycreated and peer reviewed.
www.curee.org
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CEA Earthquake Response
All CEA executives receive a cell phone earthquake notification
24Property of the California Earthquake Authority (CEA)
First Step is the USGS Website
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CISN.org
As soon as you hear about an EQ, Click here to look at ShakeMaps.
CISN.ORG
USGS
www.cisn.org
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Early Estimate of Impact
The CEA runs an extract of all the affected policyholders so we can get an immediate sense of impact and start our
media and claims management response.
CEA EARLE System – 24 / 7 Internet access
MMI 5MMI 6
28Property of the California Earthquake Authority (CEA)
Napa EarthquakeAugust 24, 2014
6.0 magnitude
29Property of the California Earthquake Authority (CEA)
Napa Earthquake: August 24, 2014
On August 24th at 3:20 a.m. a magnitude 6.0 earthquake struck the community of American Canyon/Napa Valley.
Though later called a “moderate” earthquake, it was the largest earthquake in Northern California in 25 years.
The CEA mobilized immediately.
30Property of the California Earthquake Authority (CEA)
Napa Earthquake: CEA Responds
OPERATIONS immediately posted an event code and began determining impact to CEA policy holders.
COMMUNICATIONS issued a press release Sunday morning and launched a media strategy.
FINANCE began assessing potential losses and total exposure.
IT/LEGAL/ACTUARIAL/RESEARCH supported all activities.
CEO and CMO arrived Napa at 10:00 a.m. on Sunday morning to survey the damage and respond to “on-the-scene” media requests.
31Property of the California Earthquake Authority (CEA)
Monday
Relief agencies reached out to the public.
CEA Participating Insurers set up command center and deployed adjusters.
Napa Earthquake: The Recovery Begins
Sunday
Governor declared State of Emergency.
Red Cross relief center established.
PG&E worked to restore power.
City and residents began clean-up.
32Property of the California Earthquake Authority (CEA)
Napa Earthquake: Most Residential Damage Uninsured
• Take-up rate in Napa region very low:
• Statewide average: 11%• Napa: 6%
• 504 CEA claims reported:• 96% closed to-date• $2.1 million paid
33Property of the California Earthquake Authority (CEA)
Napa Earthquake: One Key Takeaway
Perception of “high deductible” is a big barrier
Existing CEA Choice Product would have provided valuable protection to many house in impacted area
Consumers need more information about available coverage choices
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Not If - But When
Recent moderate earthquakes have tested our claims process and provided valuable learning opportunities.
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The CEA and it’s Participating Insurers are working together to be ready for when the next damaging earthquake strikes California.
Property of the California Earthquake Authority (CEA)