CEA Advisory Panel Meeting Th August 13 2019 California Earthquake Authority Main Conference Room 801 K Street, Suite 1000 10:30 A.M
Tuesday CEA Advisory Panel Meeting th August 13 2019 California Earthquake Authority Main Conference Room 801 K Street, Suite 1000 10:30 a.m.
1 WELCOME Please silence your cell phones The restrooms are through the lobby to your right In case we are evacuated, please make your way to the staircase
CEA · Advisory Panel Meeting · August 13, 2019 2 ITEM 1 • Member roll call Establishment of a quorum Meeting Call to Order
CEA · Advisory Panel Meeting · August 13, 2019 3 ITEM 2 Consideration and approval of the minutes of the November 07, 2018, Approval of Advisory Panel meeting. Minutes
CEA · Advisory Panel Meeting · August 13, 2019 4 ITEM 3 Chief Executive Officer Glenn Pomeroy will update the Advisory Executive Panel on legislative efforts as well as the newly formed Report California Wildfire Fund. He will also provide an update on the July 4th magnitude 6.4 earthquake, and subsequent earthquakes, near Ridgecrest, California.
CEA · Advisory Panel Meeting · August 13, 2019 5 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
ShakeMap – Approximately 2,000 policyholders experienced strong shaking or greater
CEA · Advisory Panel Meeting · August 13, 2019 6 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
Event 1 • Date : July 4th, 2019
• Magnitude : 6.4
• Time : 10:33:49 am Pacific Time
• Location : 6.1 Miles from Ridgecrest, California Event 2 • Date : July 5th, 2019
• Magnitude : 7.1
• Time : 8:19:53 pm Pacific Time
• Location : 11 Miles from Ridgecrest, California
CEA · Advisory Panel Meeting · August 13, 2019 7 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
M6.4 M7.1
CEA · Advisory Panel Meeting · August 13, 2019 8 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 9 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 10 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 11 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 12 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 13 ITEM 3•RIDGECREST EARTHQUAKES Searles Valley Earthquake Sequence
CEA · Advisory Panel Meeting · August 13, 2019 14 ITEM 3•RIDGECREST EARTHQUAKES Claims Response
Before an earthquake CEA preparations for control of claim processing. • CEA Claim Manual
• Interaction with our Participating Insurers (PI)
• Adjuster training
• PIs are required to annually respond to CEA catastrophe response survey After an earthquake CEA controls for managing earthquake claims. • On site presence
• Quality control of claims – re-inspections and audits
• Claim Payment controls – system business rules and finance / accounting approval process Total Claims • 428 Claims (COB 8/9/19)
CEA · Advisory Panel Meeting · August 13, 2019 15 ITEM 3•RIDGECREST EARTHQUAKES On-Site Presence – CEA team deployed to the earthquake zone starting on Saturday, July 6th.
CEA · Advisory Panel Meeting · August 13, 2019 16 ITEM 3•RIDGECREST EARTHQUAKES Summary owned media facilitated by CEA Communications
17 ITEM 3•RIDGECREST EARTHQUAKES Summary traditional media facilitated by CEA Communications
Bakersfield Los Angeles Monterey Sacramento KGET/Telemundo 17 Business Life KDON-FM, KION, KOCN-FM and Capitol Morning Report KISV KABC KTOM-FM Capitol Public Radio (NPR) KRAB KABC Radio Los Angeles Capitol Weekly Sacramento KCBS National CBS 13 Bay Area KDOC A.M. Best News KATD KGO (ABC) KFI A.M. Best Radio KFBK KIQI 1010 AM KNBC Associated Press KUVS Univision 19 KPIX (CBS) KNX Business Insurance NorCal Names podcast KQED (NPR) KTLA Bustle The Sacramento Bee KRON4 KTTV CBS Moneywatch KSTS Telemundo 48 KVEA Telemundo 52 CBS News San Diego KTVU (Fox) Los Angeleno CNBC CoStar News NBC Bay Area Los Angeles Times CNN KBNT Univision 17 San Francisco Chronicle NBC4 Fox Business News KFMB-FM Fresno Orange County Register Insurance Journal KGTV (ABC) Southern California Public National Public Radio (national desk) KNSD (NBC) KALZ Radio NBC Universal KOGO KMPH (Fox) Telemundo LA NPR All Things Considered KSWB (Fox 5) KSOF Univision LA Patch KUSI Inland Empire The Associated Press The New York Times Statewide Chino Hills Champion and Thomson Reuters iHeartMedia Chino Champion KFNY/KFOO Palm Springs Ventura County KGGI Riverside KESQ Telemundo 15 KCLU (NPR) San Bernardino Sun
CEA · Advisory Panel Meeting · August 13, 2019 18 ITEM 3•RIDGECREST EARTHQUAKES Summary social media facilitated by CEA Communications
Facebook Organic reach 7/3 – 7/8 up 105% compared to same time previous month (post sharing USGS post during morning after 7/5 earthquake had highest engagement).
California Earthquake Authority
Twitter Impression increase 7/3 – 7/8 up 25% compared to same time previous month (post encouraging people to call their home insurers with questions had most impressions – 10,541).
@CalQuake
CEA · Advisory Panel Meeting · August 13, 2019 19 ITEM 3•RIDGECREST EARTHQUAKES Statewide paid media facilitated by CEA Communications
“California has just been hit hard by big earthquakes.”
“If you haven’t looked into earthquake insurance lately, please take another look.”
CEA · Advisory Panel Meeting · August 13, 2019 20 ITEM 3•EXECUTIVE REPORT AB 1054: California wildfire Fund
AB 1054
“It is the intent of the Legislature to provide a mechanism that allows electrical corporations that are safe actors to guard against impairment of their ability to provide safe and reliable service because of the financial effects of wildfires in their service territories using mechanisms that are more cost effective than traditional insurance, to the direct benefit of ratepayers and prudent electrical corporations.”
21 ITEM 3•Executive Report California Wildfire Fund Governance Structure
California California Catastrophe Earthquake Authority Response Council
Voting Members (3) Voting Members (9) • Governor California • Governor • Insurance Commissioner • Insurance Commissioner • Treasurer CEA Catastrophe • Treasurer Governing Board Response • Sec. of Natural Resources Non-Voting Members (2) • 3 Appointed by Governor • Assembly Speaker Council • 1 Appointed by Senate Rules • Senate Rules Chair • 1 Appointed by Assembly Speaker
Oversight solely with regard to support services provided to the California Wildfire Fund Administrator
Appointed by California Catastrophe California California Wildfire Response Council Earthquake Fund Administrator Authority
Services Agreement (TBD)
22 ITEM 3•EXECUTIVE REPORT
Interim California Wildfire Fund Governance Structure
Gov. Code § 8899.70 (d) “Until a majority of the council CEA is appointed, the governing board of the California Governing Board Earthquake Authority shall assume the authorities and duties of the council.”
Ins. Code § 10089.6 (a) (2) “The authority shall be California authorized to exercise the Earthquake powers of the California Authority Wildfire Fund Administrator… until the appointment of the administrator by the council.”
23 ITEM 3•EXECUTIVE REPORT California Wildfire Fund
Ratepayers $10.5 B Utilities $10.5 B • Initial SMIF Loan: $2 B • Initial Contribution: $7.5 B • Annual Revenue Stream from DWR Surcharge: $900 M + • Annual Contribution: $300 M ($3 B total)
SDG&E (4.3%) • By 9/10/19 Initial: $323 M • Following Safety Annual: $12.9 M Plan approval SMIF $2 B Loan California Wildfire Fund SoCal Edison (31.5%) • By 9/10/19 Initial: $2.363 B • Following Safety 1 Annual: $94.5 M Plan approval DWR $21 B Surcharge 2 • Upon emerging $900 M/Year PG&E (64.2%) from bankruptcy Initial: $4.815 B • Following Safety Annual: $192.6 M 1 Repayment of SMIF loan Plan approval
2 Revenue stream into California Wildfire Fund
The contribution numbers in this chart are approximate figures for illustration purposes only.
24 ITEM 4 Chief Financial Officer Tom Hanzel will present to the Panel the Financial quarterly CEA financial report. Report
CEA · Advisory Panel Meeting · August 13, 2019 25 ITEM 4•FINANCIAL REPORT CEA Claim-Paying Capacity January 1, 2019 June 30, 2019
Industry Assessment Layer Industry Assessment Layer ("2nd IAL") $1.656 B ("2nd IAL") $1.656 B CEA Policyholder Surcharge* CEA Policyholder Surcharge* $1 B $1 B Bond Proceeds $690 M Bond Proceeds $714 M
Risk Transfer Risk Transfer $8.331 B $8.319 B
Available Capital Available Capital $5.658 B $5.785 B
*AB 2927 TotalTotal $17.335$17,335M B TotalTotal $17.474 $17,474M B CEA · Advisory Panel Meeting · August 13, 2019 26 ITEM 4•FINANCIAL REPORT Risk Transfer Program
• Maintain the Board approved risk transfer strategy of a minimum 1-in-400 year • $8.3 billion of risk transfer capacity • 38 contracts • 87% or $6.5 billion multi-year contracts • Traditional reinsurance 75% • Collateralized reinsurance 25% • 16 domiciles represented by more than 120 counterparties
CEA · Advisory Panel Meeting · August 13, 2019 27 ITEM 4•FINANCIAL REPORT
California Earthquake Authority 5 Year History as of June 30
GASB Basis for All Amounts 2019 2018 2017 2016 2015
Direct Premiums Written 415,137,095 382,402,166 325,302,347 292,415,462 314,921,085
Net Premiums Earned 212,687,719 170,394,519 167,074,922 219,697,202 204,651,717
Net Underwriting Gain 122,900,920 89,848,157 97,878,525 153,529,251 139,957,498
Investment Income* 61,468,215 46,626,290 38,026,686 29,285,017 17,963,430
Balance Sheet Assets 7,069,195,148 6,649,648,473 6,461,962,506 6,268,415,251 5,839,065,760
Loss and LAE Reserves 187,051 99,939 25,729 723,030 1,525,074
Risk-Transfer Expenses 185,836,393 182,530,781 145,525,023 96,439,101 99,727,079
Total Net Position 6,502,299,508 5,978,236,399 5,809,933,037 5,605,763,334 5,147,439,268
Policy Count 1,056,928 1,047,753 950,393 901,802 870,534
Claim Paying Capacity (in Millions) 17,474 15,951 15,188 12,331 11,557 * Unrealized gain/loss is not included in investment income as most investments are held to maturity, and the change from year to year can vary significantly, so it can impact reasonable comparison between years. In addition, this is consistent with statutory reporting which excludes unrealized gain/loss.
CEA · Advisory Panel Meeting · August 13, 2019 28 ITEM 4•FINANCIAL REPORT POLICIES IN FORCE (PIF) COUNT 1,060,000 1,057,125 1,056,090
1,055,000 1,053,940 1,057,132
1,050,835 1,054,178 1,053,147 1,050,000 1,048,435 1,047,753 1,046,406 1,050,285
1,045,000 1,046,949 1,047,029 1,047,147 1,042,497
1,040,000
1,036,391 1,039,432
1,035,000
1,030,000 1,031,236
1,025,000
1,020,000
1,015,000 Jan-18 Feb-18 Mar-18 Apr-18 May-18 Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19
CEA · Advisory Panel Meeting · August 13, 2019 29 ITEM 4•FINANCIAL REPORT
POLICY TYPE
7% 8% 8%
12% 11% 11%
3% 3% 3%
79% 78% 78%
JUN-17 JUN-18 JUN-19 Homeowner Mobilehome Condo Renter
CEA · Advisory Panel Meeting · August 13, 2019 30 ITEM 4•FINANCIAL REPORT
PRODUCT TYPE
10% 12% 15%
90% 88% 85%
JUN-17 JUN-18 JUN-19 Standard Choice
CEA · Advisory Panel Meeting · August 13, 2019 31 ITEM 4•FINANCIAL REPORT
WHO IS CALLING WHY THEY ARE CALLING AS OF 6/30/2019 AS OF 6/30/2019
Other 2% CEA Information Mortgage Co. Policy Services 17% Agent 2% (Applications, 39% Billing, Claims, Cancellation) 39% Non- Policyholder Policy 24% Questions (Hazard Reduction Discount, Policy Types, Coverage Questions) Policyholder 44% 33%
1,278 calls during June 2019
CEA · Advisory Panel Meeting · August 13, 2019 32 ITEM 4•FINANCIAL REPORT
WHO IS CALLING WHY THEY ARE CALLING AS OF 7/31/2019 AS OF 7/31/2019
Other 2% Mortgage Co. 2% CEA Agent Policy Information 36% Services 22% (Applications, Billing, Claims, Cancellation) Policy 42% Questions (Hazard Non- Reduction Policyholder Policyholder Discount, Policy 25% 35% Types, Coverage Questions) 36%
3,939 calls during June 2019
CEA · Advisory Panel Meeting · August 13, 2019 33 ITEM 5 Mr. Hanzel will ask the Advisory Panel for their feedback on agent Agent commission rates. Commissions
CEA · Advisory Panel Meeting · August 13, 2019 34 ITEM 6 Chief Communications Officer Chris Nance will update the TV News Advisory Panel on the CEA- sponsored landing pages on news Station sites statewide, regional briefings Initiative for TV station news teams, and work with CEA policyholders to produce advertising testimonials.
CEA · Advisory Panel Meeting · August 13, 2019 35 ITEM 6•TV NEWS STATION INITIATIVE
CEA encourages and assists TV news partners to help their viewers prepare to survive and recover from a damaging earthquake: • TV news talent PSAs • Shared website landing page • News briefings
CEA · Advisory Panel Meeting · August 13, 2019 36 ITEM 6•TV NEWS STATION INITIATIVE Public Service Announcements
Scientists say that a damaging earthquake is inevitable. “ So it’s important to get prepared. Here’s what you can do right now: • Practice how to drop, cover, and hold on during an earthquake. • Make sure your family has an emergency plan and supplies in place. • Check whether your older house should be bolted to its foundation. • And call your agent to discuss earthquake insurance options. • For tips on earthquake recovery, go to [station website]. We’re here to help. ”
CBS PSA – LA
NBC Sports – Bay Area NBC Sports – Bay Area KOFY – Bay Area NBC – LA KABC – LA
KRON – Bay Area KGO – Bay Area Univision – Bay Area KSWB – SD
CEA · Advisory Panel Meeting · August 13, 2019 37 ITEM 6•TV NEWS STATION INITIATIVE Shared Landing Page
Example: Station website
CEA · Advisory Panel Meeting · August 13, 2019 38 ITEM 6•TV NEWS STATION INITIATIVE TV News Station Briefings
In-person TV news station briefings: • CEA gathers reps from organization on landing page • To date delivered six briefings in LA and five in SF • (San Diego scheduled for August 21, 2019)
KABC – LA
KCBS – LA KGO – SF KRON – SF
CEA · Advisory Panel Meeting · August 13, 2019 39 ITEM 6•TV NEWS STATION INITIATIVE 30-Minute News Feature Story
• news briefing produced 30-minute feature story promoting landing page through earthquake experts • Feature aired again after Ridgecrest earthquake
FOX – LA
CEA · Advisory Panel Meeting · August 13, 2019 40 ITEM 6•CEA POLICYHOLDER TESTIMONIALS 30-Second TV Advertising
Mosers - Berkley Mays – Los Angeles Joes – San Diego
CEA · Advisory Panel Meeting · August 13, 2019 41 ITEM 7 Chief Mitigation Officer Janiele Maffei will update the Advisory CEA Mitigation Panel on CEA mitigation program projects including the California and Research Residential Mitigation Program Programs incentive program (CRMP Earthquake Brace + Bolt), and CEA’s financial-incentive and mitigation program (CEA Brace + Bolt).
CEA · Advisory Panel Meeting · August 13, 2019 42 ITEM 7•CEA RESEARCH PROGRAM CEA Research Program
The research department is managing three special projects: • Conversion of pre-standard ATC 110/FEMA P-1100 into a standard (model code) • CEA-PEER Quantifying the Performance of Retrofit of Cripple Walls and Sill Anchorage in Single Family Wood-frame Buildings • Update to the CUREE General Guidelines for the Assessment and Repair of Earthquake Damage in Residential Wood-frame Buildings • Development of CEA Research Grant Program
CEA · Advisory Panel Meeting · August 13, 2019 43 ITEM 7•CEA RESEARCH PROGRAM Sponsoring engineering research
ATC 110/FEMA P-1100 – Model Building Code
CEA · Advisory Panel Meeting · August 13, 2019 ITEM 7•CEA RESEARCH PROGRAM Sponsoring engineering research
UCSD component testing UCB full-scale testing
CEA-PEER Project – Quantifying retrofit benefits
CEA · Advisory Panel Meeting · August 13, 2019 ITEM 7•CEA RESEARCH PROGRAM Updating CUREE Guidelines for Assessment and Repair
CEA · Advisory Panel Meeting · August 13, 2019 46 ITEM 7•CEA RESEARCH PROGRAM Examples of structural and geotechnical damage
CEA · Advisory Panel Meeting · August 13, 2019 47 ITEM 7• MITIGATION Retrofit incentive programs Grants of up to $3,000 to retrofit houses in California
Homeowners
™
CEA Policyholders
CEA · Advisory Panel Meeting · August 13, 2019 48 ITEM 7• MITIGATION Retrofit incentive programs
2014: 9 homes 2015: 528 homes 2016: 1,555 homes 2017: 2,185 homes 2018: 3,340 homes 2019: Goal of 2000
CEA · Advisory Panel Meeting · August 13, 2019 49 ITEM 7•CEA BRACE + BOLT Program Evolution
2016 Pilot ™ • Targeting top 5 ZIP Codes (ranked by concentration of risk) in both Northern California and Southern California.
• Pre-1940 houses, policyholder for 3 years
• 3,400 policyholders eligible
• 98 retrofits completed 2019 Expansion • Zip Codes in which at least one policyholder is receiving a premium increase greater than 15%
• Own a pre-1940 house with characteristics for a code-compliant EBB retrofit; and,
• Have insured their house with CEA for at least 3 years.
• Approximately 14,000 eligible policyholders
CEA · Advisory Panel Meeting · August 13, 2019 50 ITEM 7•CEA BRACE + BOLT Program Evolution
2019 Expansion • Have a premium increase greater than 50%; and,
• Own a pre-1980 house with characteristics for a code-compliant EBB retrofit.
• Approximately 17,000 eligible policyholders. And, Policyholders who • Have a premium increase between 20% and 50%; Program Criteria Approx. # of Eligible Policyholders • Own a pre-1980 house with characteristics for a 2018 Approved 12,000 code-compliant EBB retrofit; and, Modification: more than 50% increase 17,000
• Have insured their house with Modification: 20 to 50% increase, plus 13,000 CEA for at least 2 years. 2-year CEA persistency
• Approximately 13,000 Total 42,000 eligible policyholders.
CEA · Advisory Panel Meeting · August 13, 2019 51 ITEM 7•CEA BRACE + BOLT Aggressive Outreach Plan Outreach to Policyholders • Letter sent first-class mail
• Email outreach (less than 4%)
• Follow-up phone call as information is available Outreach to Participating Insurance (PI) Companies • Work with PI’s to append agent information to policyholder data • Work with companies to alert agents to policyholder opportunity Outreach to Agents • In-person individual and group meetings, personal phone calls, emails, texts and social media messaging • Incentivize agents, as needed • CEA BB support to agents including collateral, agent training and call center. Outreach to Media • Press release announcing program expansion • Outreach to local media
CEA · Advisory Panel Meeting · August 13, 2019 52 ITEM 7•CEA BRACE + BOLT Numbers To Date
2019 Policyholder Expansion (as of 8/9/19) • 58 registered Jan-July 3 • 738 registered after July 4 • 796 total registered
o Registrants from 116 cities
o Approx. 88% Northern California
o Approx. 12% Southern California
CEA · Advisory Panel Meeting · August 13, 2019 53 ITEM 8 Public comment on matters that do not appear on this Public agenda and requests by the public that those matters be Comment placed on a future agenda.
CEA · Advisory Panel Meeting · August 13, 2019 54 ITEM 9 Closing remarks by Mr. Pomeroy. Closing Remarks
CEA · Advisory Panel Meeting · August 13, 2019 55 ITEM 10
Adjournment Thank you for attending this meeting of the California Earthquake Authority Governing Board.
General Information Media Contact Shannon McEuen Sarah Sol (916) 661-5430 (Direct) (916) 661-5502 (Direct) Toll free (877) 797-4300 [email protected]
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