PREPARING FOR THE NEXT BIG EARTHQUAKE Rotary Club of Los Gatos Chris Nance Chief Communications Officer November 7, 2017
TOP FIVE THINGS TO KNOW about the value of earthquake insurance RISK The risk is REAL . 2
THOUSANDS of known faults crisscross California Earthquakes happen on UNKNOWN faults all the time
Most Californians live within 30 MILES of an active fault
California Earthquake Rupture Forecast 1/1000 1/100 1/10 1 10 100
99% chance of a M6.7 or larger earthquake sometime in the next 30 years Actually greater than 99%
72% chance of a M6.7 or larger earthquake sometime in the next 30 years in the Bay Area
51% chance of a M7.0 or larger earthquake sometime in the next 30 years in the Bay Area… 3 times stronger than Northridge
HIGH RISK FAULTS AND HISTORIC EARTHQUAKES Hayward M7.9 1906 San Francisco EQ M6.7 1868 Hayward EQ San Andreas You Are Here M6.9 1989 Loma Prieta EQ
M7.8 SCENARIO EARTHQUAKE: LOS GATOS Los Gatos
WHAT IF … The 1906 San Francisco earthquake reoccurred … TODAY
APRIL 18, 5:12AM: M7.7-M7.9 EARTHQUAKE House damaged during 1906 San Francisco Earthquake Photo: Steinbrugge Collection, UC Berkeley Earthquake Engineering Research Center 12
Strong shaking would be felt by more than 2 MILLION single family households ....from Eureka to Salinas
250,000 households DISPLACED
Residential damage: $175 BILLION Insured: $15 Billion Uninsured: $160 Billion
Most Californians don’t have earthquake insurance Less than 10% of our homes are covered
TOP FIVE THINGS TO KNOW about the value of earthquake insurance RISK The risk is REAL . BENEFIT So is the benefit of EARTHQUAKE INSURANCE . 17
MYTHS ABOUT earthquake insurance “The GOVERNMENT will bail me out.” Government assistance, if available, is LIMITED to urgent health and safety needs. Government loans must be REPAID . 18
MYTHS ABOUT earthquake insurance Many think their RESIDENTIAL POLICY covers earthquakes. Earthquakes are NOT COVERED under a residential policy – a separate earthquake policy is required. 19
MYTHS ABOUT earthquake insurance Earthquake insurance COSTS TOO MUCH , provides TOO LITTLE COVERAGE and the DEDUCTIBLE IS TOO HIGH . CEA has dramatically LOWERED RATES , expanded COVERAGE CHOICES – and now offers a wide range of DEDUCTIBLE OPTIONS . 20
TOP FIVE THINGS TO KNOW about the value of earthquake insurance RISK Your earthquake risk is REAL . BENEFIT So is the benefit of EARTHQUAKE INSURANCE . CEA is a NOT-FOR-PROFIT residential earthquake insurer. CEA 21
@CalQuake @CaliforniaEarthquakeAuthority #CEACEO
IN THE BEGINNING… CALIFORNIA LAW: MANDATORY OFFER Earthquake coverage excluded from homeowners policy HOWEVER Homeowners insurance companies were required to offer separate earthquake insurance policy - at time of homeowner policy sale, and every other year there after. 23
CEA: ESTABLISHED IN THE WAKE OF NORTHRIDGE EARTHQUAKE January 17, 1994 24
1994: NORTHRIDGE EARTHQUAKE Property Damage: $40 Billion Residential: $20 Billion Insured: $10 Billion AFTERMATH: Most insurance companies stopped writing Homeowners insurance 25
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PUBLICLY MANAGED • PRIVATELY FINANCED GOVERNING BOARD: Governor Insurance Commissioner State Treasurer Assembly Speaker and Senate Rules Chair Non Voting: PRIVATELY FINANCED: 978,000 Policyholders MISSION: Educate Mitigate Insure A not-for-profit provider of residential earthquake insurance 27
CEA FINANCIAL STRENGTH rated as A– (Excellent) by A.M. Best Co. 2017 $16 B Industry Assessment $14 B Layers Revenue Bonds $12 B Claim-paying capacity: 1906 San Francisco $15.2 Billion $10 B Reinsurance ($9B*) $8 B 1994 Northridge ($6B*) $6 B $4 B Capital 1989 Loma Prieta $2 B ($1B*) * Estimated CEA loss and expenses for reoccurrence of these historical events 0 Total: $15.2B 28
TOP FIVE THINGS TO KNOW about the value of earthquake insurance RISK The risk is REAL . BENEFIT So is the benefit of EARTHQUAKE INSURANCE . CEA is a NOT-FOR-PROFIT residential earthquake insurer. CEA CEA has dramatically LOWERED RATES , and now TODAY offers a wide range of COVERAGE CHOICES , DEDUCTIBLE OPTIONS and new DISCOUNTS for retrofitting older homes. 29
OVER THE LAST 20 YEARS… Overall inflation is up 51% + 51 % Overall inflation 1996 2016
OVER THE LAST 20 YEARS… Housing reconstruction costs increased by 168% + 168 % Reconstruction Costs 1996 2016
OVER THE LAST 20 YEARS… CEA has lowered its rates by a combined 55% Without these rate reductions, the average CEA premium today would be more than twice as high 22% 11% ‘06 12% 10% ‘12 ‘16 ‘97 1996 2016
TODAY: A NEW CEA Product Enhancements 1996 Today’s CEA Original Policy Options Structure Homeowner Policies: $1,500 Replacement cost Replacement cost emergency repairs with no deductible Personal Property $5,000 Up to $200,000 Coverage Policyholders are not 5%, 10%, 15%, Deductible required to pay the deductible 15% 20%, 25% to receive their claim payment Loss of Use never Loss of Use Coverage $1,500 Up to $100,000 has a deductible additional living expenses Mitigation Discount 0% Up to 20% 33
TOP FIVE THINGS TO KNOW about the value of earthquake insurance RISK The risk is REAL . BENEFIT So is the benefit of EARTHQUAKE INSURANCE . CEA is a NOT-FOR-PROFIT residential earthquake insurer. CEA CEA has dramatically LOWERED RATES , and now TODAY offers a wide range of COVERAGE CHOICES , DEDUCTIBLE OPTIONS and new DISCOUNTS for retrofitting older homes. CHOICE Now Californians can choose the earthquake policies that meet their NEEDS and BUDGET . 34
NEW PREMIUM CALCULATOR EarthquakeAuthority.com 35
NEW PREMIUM CALCULATOR EarthquakeAuthority.com 36
NEW PREMIUM CALCULATOR EarthquakeAuthority.com 2017 Choose Your Insurance Company 95032 37
NEW PREMIUM CALCULATOR EarthquakeAuthority.com Los Gatos Example ZIP: 95032 Year built: 1980 Insured Value: $665,000 Number of Stories: 1 Foundation: Slab 38
NEW PREMIUM CALCULATOR EarthquakeAuthority.com Premium: $829/year Deductible: 15% 39
NEW PREMIUM CALCULATOR EarthquakeAuthority.com Premium: $1,484/year Deductible: 5% 40
NEW PREMIUM CALCULATOR EarthquakeAuthority.com Premium: $562/year Deductible: 25% Building Code Upgrade Masonry veneer Personal property Separate deductible Breakables Loss of use 41
MORE CALIFORNIANS CHOOSING CEA CEA Policy Growth Continues 2,000,000 2006–2015 average annual increase: 7,200 978,000 931,000 2016 increase: 51,000 880,000 2017 increase (through September): 47,000 865,000 1,675,000 842,000 841,000 821,000 811,000 801,000 779,000 775,000 755,000 1,350,000 1,025,000 700,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Organic New Participating Insurers TOTAL 42
CONTACT YOUR AGENT EarthquakeAuthority.com 43
EarthquakeBraceBolt.com Financial Incentives to Retrofit Older Homes 44
EarthquakeBraceBolt.com Targets Cripple Wall Failure Napa 2014 45
EarthquakeBraceBolt.com Retrofit Example Before Plywood brace Foundation plate After 46
EarthquakeBraceBolt.com Financial Incentive for Qualifying Homeowners For Homeowners to Qualify: • o Owner occupied o Available to all Californians For Houses to Qualify: • o ZIP Code o Houses constructed pre-1979 o Raised continuous perimeter concrete foundation o Sit on level ground or a low-slope site o Have wood-framed walls (cripple walls) in the crawl space Reimburse up to $3,000 • 47
EarthquakeBraceBolt.com A growing program Reimburse up to $3,000 2014: 8 homes 2015: 526 homes 2016: 1,600 homes 2017: 2,000 goal 2018: 2,000+ goal - Registration will open in January 48
MITIGATION Northern California 2018 Program ZIP Codes Albany 94706 Berkeley 94702, 94703, 94704, 94705, 94707, 94708, 94709, 94710 Burlingame/Hillsborough 94010 Daly City/Colma 94014, 94015 El Cerrito 94530 Emeryville 94608 Eureka 95501, 95503 Hayward 94541, 94542, 94544, 94545 Los Gatos 95030, 95032, 95033 Millbrae 94030 Oakland 94601, 94602, 94603, 94605, 94606, 94607, 94609, 94612, 94618, 94619, 94621 Piedmont 94610, 94611 Redwood City 94061, 94062, 94063, 94065 San Bruno 94066 49
2018 registration will be open from January 23 through February 23 www.EarthquakeBraceBolt.com 50
EarthquakeAuthority.com
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