There have been some encouraging developments recently concerning the proliferation of earthquake insurance. The California Earthquake Authority stated that they have taken a step toward diversifying their risk, therefore decreasing any concentrated liability on their part. What this means for the average consumer is that there will be a greater availability of affordable policies. In fact, the CEA said that it will reduce rates by 12% beginning January 1, 2012. This is great news in our current economy, where too many families struggle with day-to-day financial uncertainties.
Only 12% of California Homes Are Covered By Earthquake Insurance
According to statistics, currently only 12% of homes are covered by earthquake insurance. We share the view of the California Earthquake Authority’s chief executive officer, Glenn Pomeroy, when he states he would like to “…develop more affordable insurance while remaining sustainable in the event of a big earthquake.” As a provider of earthquake insurance, we feel it’s in everyone’s best interest to be covered in case of a catastrophic event. The sad happenings in Japan are grim reminders of the necessity of security in the face of volatile elemental forces. We’re proud to be a part of widening the net of earthquake coverage to heretofore vulnerable California families.
What is reinsurance?
Through accessing the bond market, as opposed to allocating large amounts of capital to reinsurance, the CEA was able save money while taking advantage of the demand for the sale of bonds. Reinsurance is insurance bought by insurance companies from other insurance companies (say that 5 times fast!), so it just makes sense to reduce those costs as much as possible. Additionally, the CEA intends to have similar bond issues in the future.
All eyes are turned toward proposed Federal legislation called the “Earthquake Insurance Affordability Act,” sponsored by Senator Diane Feinstein. Pomeroy said that it would be a boon for the CEA to expand quality insurance and put a dent in the some 88% of uncovered homes because it would give the CEA the ability to issue post-event bonds.
