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October 2006

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CEA BONDS SELL WITHIN HOURS

As reported in the last issue of CEA Today, months of staff preparation and effort led to the CEA Governing Board’s approval on June 27th of the sale by the CEA of $315 million in revenue bonds.  Clearly, that preparation paid off handsomely when on July 13th the revenue bond market reacted quickly and positively to the CEA’s bond offering.

CEA’s stable financial position and strong, mid-investment-grade ratings from Moody’s Investors Service and Fitch Ratings set the stage for an oversubscription to the attractive l0-year maturity, fixed-rate (6.169 percent) bonds within just a few hours after the California State Treasurer’s Office (“STO”) made the offering.

The bond sale will strengthen and diversify CEA finances and add both capacity and flexibility to the CEA’s claim-paying ability.  Valuable assistance came from the STO’s Public Finance Division, Lehman Brothers, Goldman Sachs, TWH Advisors, bond counsel Bill Donovan (Orrick, Herrington & Sutcliffe) and Ron Lee, and Met West Securities.  Importantly, a number of CEA staff worked alongside CEA Chief Financial Officer Tim Richison in a major collaborative effort to prepare for the sale and Board presentation.  The result was by any measure a great success.

CEA RANKS AMONG TOP U.S. ‘P&C’ INSURERS

AM Best Logo

In July, CEA was recognized as one of the top 200 (by net written premium) property and casualty insurance writers in the United States in A.M. Best’s annual ranking.  The CEA placed 132nd out of 200 and is the only monoline-risk insurance provider on the list, solid evidence of a strong position in the insurance marketplace.

HAYWARD FAULT EXHIBIT REMAINS OPEN WITH CEA SPONSORSHIP

Hayward Fault Image

On-lookers view a section of the Hayward Fault at Fremont Central Park.

A dramatic but financially beleaguered geological reminder of the Bay Area’s vulnerability to huge earthquakes struggled to remain open to the public until a just-in-time sponsorship arrived from the CEA.

The Hayward Fault Exposed! An Interpretive Viewing and Educational Exhibit is a trench and viewing platform that opened last March along a surface trace of the Hayward fault in Fremont’s Central Park.  It debuted as a hands-on part of the ’06 Centennial Alliance’s commemoration of the Great San Francisco Earthquake and Fire.  Since March the exhibit has given more than 9,000 visitors an opportunity to see—and touch!—a real fault.

The only exhibit of its kind in the U.S., the open-air exhibit was originally developed and operated by the U.S. Geological Survey and others in cooperation with the City of Fremont.  But tours were stopped June 30th, when funding for the exhibit ended.  CEA provided $46,000 to keep this significant exhibit open until September 10th because of its unique seismic-educational value for Californians—in other words, this is a story that needed to be told: 

  • The Hayward Fault last ruptured in 1868 at a magnitude of roughly 6.9, killing five people in the then sparsely populated area. 
  • Today, the fault is considered one of the most dangerous in the Bay Area because it lies beneath so many homes and businesses—and it’s directly under the 75,000-seat Memorial Stadium at UC, Berkeley. 
  • Paleoseismologists say the Hayward fault experiences a large earthquake every 130 to 150 years, so as they say . . . do the math!

For stepping up and providing the “rescue” funding, the CEA received extensive praise from public officials, scientists, citizens, and the press—it’s really all about doing “the right things for the right reasons!”

TESTING CEA’S EARTHQUAKE RESPONSIVENESS—OR, HOW BIG WAS IT?

A magnitude 5.0 earthquake off the coast of north central California July 19th did no apparent damage in the small, often seismically beset town of Petrolia (site of a major, damaging quake in 1992), but it did provide CEA with an opportunity to institute its internal earthquake-response process using the CEA’s proprietary Early Loss Estimation (or “EARLE”) System, a state of the art, advanced-technology system for post-earthquake claims reaction and damage and loss assessment.

This EARLE System “reality test” demonstrated not only the effective technological aspects of CEA’s response model but also the success of CEA’s collaboration with state agencies including the California Department of Conservation and its California Geological Survey.

CEA, DEPARTMENT OF CONSERVATION, & CGS: PARTNERS IN PROTECTING CALIFORNIANS FROM EARTHQUAKE RISKS

Located in the same building as the CEA are the California Department of Conservation (DOC) and its division, the California Geological Survey (CGS).  DOC and CGS are partners not only in CEA’s earthquake-preparedness mission but in working with the greater science, engineering, and earthquake-modeling communities to uncover and assemble the building blocks of earthquake risk that allow the CEA to price and sell its insurance products.

Bridgett Luther is the Director of DOC, and John Parrish, Ph.D., is the California State Geologist and heads the CGS.  

Director Bridgett Luther

Bridgett Luther

Bridgett Luther, Director
California Department of Conservation

Ms. Luther has a very personal commitment to earthquake preparedness—she works in Sacramento but lives in San Francisco, a seismic hotspot.  As do many at the CEA, every time an earthquake of 5.0 or larger shakes the state she gets a phone call.  “When I get an early morning call I always look around to see if the room is shaking!” she recalled.

DOC divisions observe, monitor, and protect California’s physical environment.  “I think we have a very effective partnership with the California Earthquake Authority, because we both understand the importance of using the best science available to prepare for an earthquake,” she said.

Even before Governor Schwarzenegger appointed her last year, Ms. Luther was a leader in community service.  She was regional development director for Hands-On Bay Area, a five-county volunteer-management non-profit organization.  She was a program director for the Trust for Public Land and served on water and land-planning advisory panels in North Carolina.  She brings a keen appreciation of the importance of good science when planning for natural disasters:  “Our mission is to provide the best possible science so CEA and state agencies can make decisions quickly.”

Dr. John Parrish

Dr. John Parrish

John Parrish, Ph.D., State Geologist
California Geological Survey

CGS shares a building with CEA, but the link is even closer than that—CEA depends on the CGS for the latest science underpinning California’s geological composition.  As State Geologist, Dr. Parrish almost literally has his hand on the state’s pulse, with some 1,000 seismic-monitoring stations and 5,000 motion-detection instruments deployed.    

CEA and CGS have a long and cooperative history.  Science and maps from the CGS were a basis for CEA insurance rates after CEA was created in 1996, two years after the Northridge earthquake.  Today, by providing comprehensive geologic-condition maps, CGS continues to help CEA understand California’s earthquake risks.  Last year when CEA sought to reduce rates, Dr. Parrish’s professional staff were instrumental in providing the most current information about soil composition and ground-motion potential.  

Dr. Parrish, who is also a California Registered Geologist and a California Registered Environmental Assessor, is a member of the American Association of Petroleum Geologists, The American Institute of Professional Geologists, and the Society for Mining, Metallurgy & Exploration.

A Partnership that Works for California

The skills of the dedicated professionals at the California Department of Conservation and the California Geological Survey are known across the country and indeed, around the world.  The leadership of Bridgett Luther and John Parrish focus that professionalism and dedication to benefit all the state’s residents, and for that the CEA is grateful. 

CEA’S PREPAREDNESS MESSAGE, NOW IN EVEN MORE LANGUAGES!

Putting Down Roots

People up and down the state know that the CEA has been a major sponsor of the highly successful earthquake-preparedness booklet, Putting Down Roots in Earthquake Country—literally millions of the booklets have been distributed across California, in stores, wrapped around Sunday newspapers, and handed out by any number of insurance professionals, educators, and home-improvement stores.  Now Roots is coming out in a Spanish-language edition and also will be printed in several Asian languages, including Chinese, Vietnamese, Korean, and Cambodian.  

CEA is working with the U.S. Geological Survey, FEMA, the Governor’s Office of Emergency Services, the Red Cross, PG&E, New American Media, and the Asian Pacific Fund to publish abridged, multi-lingual versions of this indispensable booklet that has become the gold standard of earthquake preparedness publications.


CEA EDUCATING AGENTS AND ADJUSTERS ONLINE AND ON-SITE

Continuing Eduacation Credits  Logo

Throughout the spring and summer months, CEA traveled the state and across the nation to learn the latest on disaster response—we strongly believed that the lessons of Katrina and Rita should not be unavailable to Californians because those hurricanes and their aftermath unfolded in distant locations.  Now the CEA has brought the power of its newfound knowledge to CEA-sponsored training sessions so agents and adjusters from our participating insurers can better appreciate and learn about CEA’s claim-handling procedures and the challenges they will face post-event.

In just the past three months, the CEA has been invited to make training presentations by Farmers Insurance, Armed Forces Insurance, Liberty Mutual, and the Automobile Club of Southern California.  And during the final weeks of the Oakland Museum of California’s exhibit, Aftershock! (of which the CEA was a major sponsor), the CEA had four on-site agent-training sessions at the Museum itself—the attraction of touring the exhibit (and free continuing-education) credits creatively enhanced attendance.

CEA is continuing its record-setting pace for training insurance agents and adjusters who handle CEA earthquake claims.  As of July 31st, some 586 agents and 352 adjusters had completed CEA training in 2006.  Insurance representatives are finding it easy to log on to www.EarthquakeAuthority.com and earn two free continuing education credits in support of a California property and casualty insurance license.

 

CEA Governing Board: Upcoming Meetings

  • October 26, 2006
  • December 14, 2006

Unless otherwise noted, Governing Board meetings are on Thursdays and begin at 1:00 p.m.


CEA Advisory Panel: Upcoming Meetings

  • November 30, 2006 (joint meeting with the CEA Governing Board)

Unless otherwise noted, Advisory Panel meetings are on Thursdays and begin at 10:30 a.m.

 

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.