CEA Joins Historic Seismic Research Effort
Moving dynamically to support the CEA’s largest research effort ever, the Authority's Governing Board in February voted to launch the CEA into a historic multi-year research plan. The plan will advance the state of the art of earthquake science and engineering while providing the CEA a more comprehensive view of how earthquakes affect residential properties. The research also provides a trove of valuable information to researchers, engineers, and public policy decision-makers. The CEA’s financial commitment of $2.5 million over three years is leveraged with substantial funding from other organizations to produce three innovative new projects and continue an earlier crucial project. This is the lineup, with a fuller explanation appearing below:
“This is an exciting opportunity for scientists to come up with a better model for forecasting earthquakes in California,” said Tom Jordan, W. M. Keck Professor of Earth Sciences at the University of Southern California and Director of the Southern California Earthquake Center (SCEC).
Dr. Jordan notes that the earthquake “loss equation” depends on three factors that amplify risk: (1) hazard (primarily ground faulting and shaking but also secondary effects such as landslides, liquefaction, and tsunamis), (2) exposure (density and extent of the “built environment”), and (3) the fragility of the built environment (vulnerability of structures and non-structural features). It also depends on a factor that attenuates risk: the resiliency of the community, which includes effective response to earthquake disasters and the ability to spread losses over a wide economic base through insurance.
The three new projects will involve 600 scientific experts from various federal, state, and private organizations, including not only SCEC, but also the United States Geological Survey (USGS), the Pacific Earthquake Engineering Research Center (PEER), and the National Science Foundation (NSF).
“By law, CEA rates must be not only actuarially sound, but also based on the best available science. These projects are truly historic, and we are pleased to play such a key role in bringing together the best and brightest in seismic and engineering research,” said Elaine Bush, CEA Chief Executive Officer. To meet the rigorous scientific criteria the law requires, the CEA relies on the broadest possible consensus of scientific data and opinion from earth scientists, engineers, and other experts.
Uniform California Earthquake
As noted, the earthquake “loss equation” assesses hazard, exposure, and fragility, with damage and loss ameliorated by a community’s resiliency. Earthquake insurance ratemaking focuses first on the hazard factor – this study will dramatically improve and make consistent earthquake rupture expectations and ground-shaking attenuation elements.
Existing science provides significantly different information for Southern California and Northern California – not only are the hazard estimations based on different scientific assumptions, but the North and South information was produced at various times and is not consistent from region to region. The new, CEA-funded study will produce a statewide, non-region-specific, hazard estimate based on consistent methodology. So, while the science will certainly advance through these efforts, the revolutionary part of this project for the CEA is that California will have for the first time a uniform, consensus-based rupture forecast for the entire state – this will provide a much-enhanced basis for CEA rates.
Enhancing the Next-Generation
Earthquake damage is based in large part on how much ground motion is triggered by a temblor. Unfortunately there are few strong-motion recordings close to large-magnitude quakes, and even those are from earthquakes outside California.
This project will enhance the accuracy and quality of earthquake ground motion estimates and therefore produce more accurate, higher-quality assessments of seismic hazard and risk. The CEA’s earthquake model is being updated, and once that has occurred, we will have a clear understanding of the changes brought by the new analytical framework.
End-to-End Simulation: Rupture to
This pilot study will use realistic scenarios to predict damage to buildings from large earthquakes in Southern California. By establishing a residential building “index,” the CEA will be better able to evaluate its portfolio risk – and 70 percent of the CEA’s portfolio is concentrated in Southern California.
As important, the research will enhance the CEA’s ability to assess earthquake risks statewide, and as an added benefit, should provide extremely useful data to support building-code updates throughout the State.
(Continuation Project) –
Development of Guidelines
for the Assessment and Repair of Earthquake Damage in Residential Buildings -
In this fourth project, the CEA continues its support of CUREE’s effort to complete additional chapters and a glossary for the authoritative Guidelines for the Assessment and Repair of Earthquake Damage in Residential Woodframe Buildings that has already proven so useful in earthquake loss-assessment scenarios.
The Guidelines comprise a collection of “standard industry practices” for the evaluation and repair of earthquake damage to residential structures. The approved funding will fund a general-audience version, including insurance adjusters, contractors, and homeowners. A more comprehensive version (to be developed outside this project) is for engineers and architects.
CEA has provided major funding for the past three years to develop the Guidelines and now continues its support because the Guidelines have proven so useful to the CEA and its participating insurers: they improve the quality of adjusters’ work, solidly underpin both insurer and consumer engineering reports, and assist the earthquake-adjuster training programs that insurers are now required by law to conduct.
A 6.5 magnitude earthquake, epicentered near San Simeon, shook much of California’s Central Coast on December 22, 2003. The CEA provided on-site response immediately, and then over the past year, has conducted a detailed review of the 465 filed claims.
The information captured from the review helps the CEA understand how it can better respond to CEA policyholders’ needs, both through adjusting techniques for existing policy coverages and future product enhancements.
After the San Simeon quake the CEA received and processed 465 policyholder claims. Of the 465 claims, 418 were for damage to single-family dwellings, and the remaining 47 were for damage to mobilehomes, rental units, and condominiums. Sixty-five claims exceeded the policy deductible, resulting in over $2 million in total CEA claim payments.
CEA Adds Third Earthquake Modeling Firm
For the second time in less than a year, the CEA will add a new company to its roster of earthquake modeling firms. AIR Worldwide, Inc., joins EQECAT and RMS as a provider of earthquake-modeling services to the CEA. For the first time, the CEA has access to the three world-recognized earthquake models.
Over the years, earthquake models have varied in their analysis of California earthquake risk, but historically the CEA has used the services of one earthquake model and modeler, EQECAT, for all of its modeling objectives. After careful analysis, the CEA Governing Board agreed with a staff recommendation that the CEA would benefit from having access to all three world-recognized earthquake models.
By working with the AIR and RMS, the CEA will have access to multiple perspectives, allowing us to build our knowledge of California’s residential earthquake risks. The CEA could potentially use that knowledge in validating modeled results, developing earthquake-education programs, and supporting new and varied product enhancements.
In June 2004, the CEA Governing Board approved a contract with RMS.
CEA Joins ’06
The 100th anniversary of 1906’s Great San Francisco Earthquake and Fire will be a time of sober remembrance but should also provide excellent opportunities to deliver meaningful earthquake-preparedness messages to Californians, both North and South. As part of those sweeping efforts, the CEA has joined the ’06 Alliance, a blue-ribbon consortium of some 90 organizations, focused on developing events and activities to commemorate the 100th anniversary of the 1906 quake.
The CEA is also sponsoring production of an educational video which places the 1906 San Francisco earthquake in the context of modern earthquake science and loss-mitigation. The USGS will lead the video project, which will air in April 2006 as a one-hour, prime-time special commemorating the earthquake centennial.
USAA Subsidiary Added to CEA Participating Insurers
The CEA Governing Board has authorized the United Services Automobile Association (USAA) subsidiary USAA-GIC to be added to the CEA list of participating insurers. USAA General Indemnity Company (USAA- GIC) plans to issue residential property insurance beginning January 2006.
By law, each CEA participating insurer must enter into an Insurer Participation Agreement; all such existing agreements have been executed on behalf of each respective participating insurer, the Authority, and the Insurance Commissioner. The Agreement sets forth the rights and responsibilities of the parties “with respect to each participating insurer’s participation in the Authority.” Agreements must be uniform for all participating insurers.
By law, affiliates of CEA participants and insurers under common control with a CEA participant must also be or become CEA participating insurers. For example, when a CEA participant has an affiliate, subsidiary, or parent company that issues residential property insurance in California, each must execute or become a party to a participating-insurer agreement.
USAA is an original member of the CEA and since the Authority’s inception has issued residential property insurance in California only through USAA and USAA Casualty Insurance Company, the entities named in USAA’s Agreement. USAA now plans to begin issuing residential property insurance through USAA-GIC, a wholly-owned subsidiary, but as required by law, USAA-GIC must be subject to a CEA agreement.
Board Would Change Under Board-Sponsored Legislation
Welcomes Newest Advisory Panel Member
Mr. Coulon is a registered Select Agent with State Farm in San Diego and has just been appointed to a four-year term by Insurance Commissioner John Garamendi. A great deal of Mr. Coulon’s insurance business is with condominium owners and associations, expertise that no doubt will be beneficial to the Panel on condominium-loss-assessment issues.
Legal Advisory - As a matter of its standard operating procedure and as part of its general compliance program, the CEA continually confirms that it complies with all applicable laws, regulations, and rulings, including those regarding insurance rating and pricing.
The CEA's use of information obtained from third parties is in compliance with applicable privacy laws and regulations.