To no one’s surprise, California is the country’s most earthquake prone state. Following the 1994 Northridge earthquake, the state formed a public insurance pool known at the California Earthquake Authority (CEA). Currently offered by roughly 25 carriers in the state, CEA earthquake policies have formed the backbone of the state’s insurance market for more than two decades.
When California created the CEA, it initially offered a bare bones “mini-policy” that offered basic coverage for homes. In order to increase uptake of Earthquake insurance, the CEA began offering features like loss of use, coverage for contents, and pool repair. While these new features have helped the CEA grow 28% since 2015 to more than 1.1m policies, growth has created significant challenges. The CEA now insures property with a market value of $590 billion, straining its ability to obtain reinsurance. The $10 billion of reinsurance the CEA bought this year cost $500 million, and now the Authority has to determine whether to increase rates or reduce coverage in order to manage these new costs.
While the CEA mulls it’s approach to rising reinsurance costs, private market insurers are continuing to innovate to offer coverage that meets or beats the CEA, and often at much lower cost. Even as the CEA contemplates rate increases and coverage cuts, Annex’s APIs are making it easy for insurance agencies and homeowner’s carriers to offer market leading private earthquake insurance to their customers.
For those living in California, earthquake risk is a fact of life. With growth in the private insurance market and world-class technology, protecting you and your customer’s biggest asset against the next big one should be easy.