1. science
2. geology
3. seismology
4. earthquakes

These slides and all their contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
Item 1: Call to Order and Member Roll Call
•
•
•
•
•
Governor
Treasurer
Insurance Commissioner
Speaker of the Assembly
Chairperson of the Senate Rules Committee
Establishment of a quorum
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
2
Item 2: Approval of Minutes
C
onsideration and approval of the minutes of the
August 28, 2014, and October 7, 2014, CEA
Governing Board meetings.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
3
Item 3: Executive Report
T
he CEO Report will include an update for the Board
on federal and state legislative activities of interest
to the CEA.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
4
Item 3: Executive Report
2014 Accomplishments
Educate
Mitigate
Insure
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
5
Item 3: Executive Report
2014: Educate
Promoted Commemorative Events
Broadcast TV news reels in LA and Bay Area
Produced 30-minute TV special for Bay Area
Published 12-page insert for 12 Bay-Area newspapers
Launched New Ad Campaign
Delivered consistent theme throughout all
CEA’s public-outreach activities
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
6
Item 3: Executive Report
2014: Educate
Post-Napa Proactive Media Outreach
Published open letter to consumers in
25 newspapers
Delivered “EQ Basics” to 23,000 agents
and 775 reporters
Hosted “Sold-Out” agent forum
Renters Campaign
Produced “pilot” renterspecific advertising
campaign for Bay Area
Partnered with United
Policyholders, City/County
San Francisco, and City of
Oakland
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
7
Item 3: Executive Report
2014: Mitigate
Pilot and Expansion
Evaluation of pilot
Expansion begins January 2015
Phase 1 goal: 650 homes
ATC 110 Prestandard
Program plan and complete
table of contents finalized
Napa area mitigation research
• Plan developed
• Research specialist to be hired
• Working with Napa Mayor and city
officials
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
8
Item 3: Executive Report
2014: Insure
Risk-Transfer Savings
Ursa Re cat bond
Revenue bond sale
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
9
Item 3: Executive Report
2014: Insure
Risk Transfer Savings
Ursa Re cat bond
Revenue bond sale
Diversifying CEA’s claim-paying capacity
Mandatory Offer Reform
Replace 30 year-old offer
Create new CEA marketing piece
Changing the way Californians learn about
earthquake insurance!
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
10
Item 3: Executive Report
2014: Insure
Developed rate and form application for CEA
Board consideration
• Expanding choices
• Lowering rates
• Increasing mitigation discount
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
11
Item 3: Executive Report
‘84
‘94 ‘95 ’97 ’99
’04 ‘06
‘12
’14 ‘15 ‘16
Northridge
EQ
Mini
Policy
Mandatory
Offer
Expanded
coverage
options
CEA
Supplemental
Policy
California Earthquake Authority
Governing Board Meeting
CEA
Choice
Policy
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
12
Item 3: Executive Report
1984 Legislature establishes “Mandatory Offer” requirement
Formal earthquake notice required for residential policyholders
1994 Northridge earthquake
$10B insured losses
Industry sought repeal of “Mandatory Offer” law
1995 Legislature establishes earthquake “mini policy”
• Minimum coverage requirements to satisfy Mandatory Offer
• Insurance industry restricted access to homeowners insurance
1996 CEA launched in December
“Homeowners Insurance Availability Act”
1999 CEA expanded coverage options
Supplemental Coverages
2012 CEA created CHOICE
Expanded choices and separate deductibles
2014 CEA develops rate-and-form application
Further expanding choices and increasing value
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
13
Item 3: Executive Report
Evolution of
CEA Coverage
1995
Mini Policy
1999
CEA
Supplemental
2012
CEA
Choice
2014
CEA
Proposal
Structure
Full
Full
Full
Full
Deductible
15%
10% & 15%
10%, 15%
add 5%, 20%, 25%
Personal Property
$5,000
Up to $100,000
Up to $100,000
Up to $200,000
Loss of use
$1,500
Up to $15,000
Up to $25,000
Up to $100,000
Emergency Repair
None
None
$1,500
$1,500
Mitigation Discount
None
5% - CEA Inception
5%
Up to 20%
Coverages
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
14
Item 3: Executive Report
‘84
‘94 ‘95 ’97 ’99
’04 ‘06
‘12
’14 ‘15 ‘16
Northridge
EQ
9% Rate
Decrease
Mini
Policy
Mandatory
Offer
11% Rate
Decrease
23% Rate
Decrease
12.5% Rate
Decrease
Expanded
coverage
options
CEA
Supplemental
Coverages
California Earthquake Authority
Governing Board Meeting
CEA
Choice
Policy
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
15
Item 3: Executive Report
CEA Policy Count: 1998–2014
2005: Previous largest growth year
• 24,092 - Virtually all from adding Foremost Insurance
1,000,000
2014: Anticipated to be largest growth year in CEA history
• 24,075* – All from organic growth
950,000
900,000
912,173
865,911
881,719
841,503
850,000
800,000
841,836
819,502
829,951
800,930
775,464
768,808
779,362
751,767
750,000
811,317
820,932
754,672
724,722
700,000
727,675
650,000
600,000
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
*As of 10/31/2014
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
16
2014*
Item 3: Executive Report
2014: Insure
900000
865,911
CEA Policy Count
800000
775,464
700000
Since January, 2008, while CEA policy count
has grown by 11%, policies written by nonCEA companies have declined by 34%
600000
500000
406,506
400000
Rest of Industry Policy Count
300000
267,986
2014 data not
available
200000
2004
2005
California Earthquake Authority
2006
2007
2008
2009
2010
Governing Board Meeting
2011
2012
2013
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
2014
17
Item 3: Executive Report
Educate – Mitigate – Insure
Research – Completed NGA West2 and UCERF3
IT – New Project-Portfolio Management and Infrastructure Upgrades
Workforce Planning – Implementing legislative changes
Metrics Development – Developing CEA performance measures
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
18
Item 3: Executive Report
2015 Legislative Considerations
1. Risk Transfer cost savings
2. Seismic retrofit financing
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
19
Item 3: Executive Report
Projection: 01/01/2016
CEA Claim-Paying Capacity
New IAL $237M
2nd IAL
$1.65B
Bond Proceeds $661M
Risk-Transfer
$4.3B
Capital
$4.9B
Financial Strength
• Actuarially sound rates
• 865,000 policyholders
Rating Agencies
• CEA required to maintain at least
1-in-450-year capacity
Reinsurance costs
• ≈$200M per year
• 60% of overall expenses
• 40% of policyholder premium
• Must be borne by policyholders
Since Inception
• CEA policyholders have paid $8.4B in premium
• CEA has paid $3.56B in reinsurance premium
• CEA has received $250,000 in reinsurance
claim payments
Total: $11.8B
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
20
Item 3: Executive Report
Concept 1: Risk Transfer Cost Savings
Projection 01/01/2016
1 in 475 yrs
CEA Claim-Paying Capacity
New IAL $237M
P
E
B
2nd
IAL
$1.65B
1 in 265 yrs
1 in 215 yrs
$500M
PEB $500M
Bond Prodeeds $661M
Post-Event Bond: Backed by Assessments
• Repaid by assessment on all residential policies
issued by CEA participating insurers
• Maximum assessment: 1% (about $10/policy)
• Triggering event :
o Minimum: 1-in-265 years (0.37%)
Hayward/Rogers Creek 7.6M, S. San Andreas 7.9M
o
Risk-Transfer
$3.3B
($1B reduction)
Capital
$4.9B
Maximum: 1-in-475 years (0.21%)
Puente Hills Thrust 7.05M, Santa Monica 7.55M
Post-Event Bond: Backed by Surcharges
• Repaid by surcharge on all CEA policyholders
• Contemplated surcharge: 10% (about
$80/policy/year)
• Triggering event:
o Minimum: 1-in-215 years (0.46%)
N. San Andreas 7.8M, Puente Hills 6.8M
o
Maximum: 1-in-265 years (0.37%)
Hayward/Rogers Creek 7.6M, S. San Andreas 7.9M
•
Current law authorizes up to 20% premium
surcharge per year on CEA policyholders.
Total: $11.8B
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
21
Item 3: Executive Report
Concept 1: Risk Transfer Cost Savings
Projection 01/01/2016
1 in 475 yrs
Projection 01/01/2016
CEA Claim-Paying Capacity
New IAL $237M
1 in 475 yrs
2nd IAL
$1.65B
New IAL $237M
P
E
B
2nd
IAL
$1.65B
1 in 294 yrs
Bond Proceeds $661M
CEA Claim-Paying Capacity
1 in 265 yrs
1 in 215 yrs
Risk-Transfer
$4.3B
$500M
PEB $500M
Bond Proceeds $661M
Risk-Transfer
$3.3B
($1B reduction)
Capital
$4.9B
Capital
$4.9B
Total: $11.8B
California Earthquake Authority
Total: $11.8B
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
22
Item 3: Executive Report
Concept 1: Risk Transfer Cost Savings
Projection 01/01/2016
CEA Claim-Paying Capacity
New IAL $237M
P
E
B
2nd
IAL
$1.65B
$500M
PEB $500M
Bond Proceeds $661M
Risk-Transfer
$3.3B
($1B reduction)
Immediate benefits
Reinsurance cost savings: $35–45M/year
Potential uses of savings:
• Rate reduction
• Mitigation
• Funding for Earthquake Early
Warning System
Capital
$4.9B
Total: $11.8B
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
23
Item 3: Executive Report
Concept 2: Seismic-Retrofit Financing
Participation would be completely
voluntary
100% financing for single- and multi-family
residential-mitigation projects
No money down
Long-term repayment
Easy debt service:
• Repayment through property-tax bill
• Loan stays with the property upon
sale or transfer
Precedent for this type of program
• Community infrastructure
• Energy-efficiency
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
24
Item 4: South Napa Earthquake: Post-Event Update
M
r. Pomeroy will present to the Board a postevent update on the August 24, 2014,
South Napa earthquake.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
25
Item 4: South Napa Earthquake: Post-Event Update
La Habra – March 28, 2014
M. 5.1
454 CEA claims
99% closed
•
$343,000 paid
7 exceeded deductible (total $261,000)
63 Emergency Repair (Average: $755)
•
•
South Napa – August 24, 2014
M. 6.0
478 CEA claims
•
92% closed
$818,982 paid
•
•
California Earthquake Authority
17 exceeded deductible (total $410,000)
135 Emergency Repair (Average: $996)
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
26
Item 4: South Napa Earthquake: Post-Event Update
Mailed letter to 6,600 Napa and
Solano County policyholders
• Presidential declaration
• Federal assistance may
be available
• Impending deadlines and
appeal procedures
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
27
Item 5: Financial Report
C
hief Financial Officer Tim Richison will present the
CEA financial report.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
28
Item 5: Financial Report
California Earthquake Authority
Balance Sheet
as of September 30, 2014
Assets
Cash and investments:
Cash and cash equivalents
Restricted cash & equivalents
Restricted investments
Investments
$
Total cash and investments
5,223,929,288
Premiums receivable, net of allowance for
doubtful accounts of $6,607,526
Capital contributions receivable
Risk capital surcharge receivable
Interest receivable
Securities receivable
Restricted securities receivable
Prepaid reinsurance premium
Transformer reinsurance premium deposit
Prepaid transformer maintenance premium
Equipment, net
Deferred policy acquisition costs
Other assets
Total assets
119,358,057
51,606,610
314,148,112
4,738,816,509
50,732,714
14,898,219
5,316,041
9,631,130
279,773
723,026
41,831,232
62,022
$
5,347,403,445
$
319,566,327
2,605,358
4,402,804
2,086,660
63,000,000
971,618
Liabilities and Net Position
Unearned premiums
Accounts payable and accrued expenses
Payable to California Residential Mitigation Program
Accrued reinsurance premium expense
Claim and claim expense reserves
Securities payable
Revenue bond payable
Revenue bond interest payable
Total liabilities
392,632,767
Net position:
Restricted, expendable
Unrestricted, participating insurer contributed capital
Unrestriced, State of California contributed capital
Unrestricted, all other remaining
302,477,310
777,384,796
206,815,902
3,668,092,670
Total net position
4,954,770,678
Total liabilities and net position
California Earthquake Authority
Governing Board Meeting
$
5,347,403,445
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
29
Item 5: Financial Report
California Earthquake Authority
Statement of Revenues, Expenses and Changes in Net Position
Year-to-Date Ended September 30, 2014
Underwriting income:
Premiums written
Less premiums ceded - reinsurance
Less risk capital surcharge
Net premiums written
463,313,771
(144,919,226)
318,394,545
Change in unearned premiums
(23,156,102)
Net unearned premiums
(23,156,102)
Net premiums earned
295,238,443
Expenses:
Claim and claims expense
Participating Insurer commissions
Participating Insurer operating costs
Reinsurance broker commissions
Pro forma premium taxes
Other underwriting expenses
Total expenses
2,812,759
44,030,868
14,593,496
3,616,667
10,887,874
18,691,485
94,633,149
Underwriting profit
Net investment income
Other income
Financing expenses, net
Earthquake Loss Mitgation Fund expenses
Participating Insurer Contributed Capital
State of California premium tax contribution
Increase in net position
Net position, beginning of year
Net position, end of year to date
California Earthquake Authority
$
Governing Board Meeting
200,605,294
14,589,715
308,115
(2,685,404)
(548,751)
10,887,874
223,156,843
4,731,613,835
$ 4,954,770,678
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
30
Item 5: Financial Report
CALIFORNIA EARTHQUAKE AUTHORITY
Insurance Services
Budgeted and Actual Expenditures
2014 Budget Year
(a)
Consulting Services
Claims
Compliance
Executive Recruiting
Financial Consulting
Government Relations
Human Resources
Information Systems
Internal Audit
Investment Compliance
Public Relations
Other Consulting Services
Total Consulting Services
(c)
(d)
(d=a+b+c)
(e)
(f)
(f=d-e)
(g)
(g=e/d)
Augmented & Adjusted
Actual Approved Budget (d) vs.
Percentage used of
Expenditures
Actual Expenses (e) Augmented & Adjusted
as of 09/30/2014
as of 09/30/2014 Approved 2014 Budget
Approved
2014 Budget
1/1/2014
Adjustments
thru 09/30/2014
Augmentations
thru 09/30/2014
2014 Budget after
Augmentations
and Adjustments
11,679,999
753,615
405,987
2,000
181,140
285,719
167,500
35,000
1,268,015
-
-
11,679,999
753,615
405,987
2,000
181,140
285,719
167,500
35,000
1,268,015
7,596,989
560,591
223,216
134,943
137,715
163,381
9,553
239,494
4,083,010
193,024
182,771
2,000
46,197
148,004
4,119
25,447
1,028,521
65.04%
74.39%
54.98%
0.00%
74.50%
48.20%
97.54%
27.29%
18.89%
34,885
47,600
689,665
50
-
-
34,885
47,600
689,665
50
21,931
29,810
606,200
3,450
12,954
17,790
83,465
(3,400)
62.87%
62.63%
87.90%
6900.00%
$
5,823,902
62.55%
$
10,000
150,000
75,000
184,326
106,000
320,244
126,655
50,000
40,000
80,429
169,818
1,312,472
0.00%
0.00%
0.00%
29.11%
44.21%
18.93%
12.65%
0.00%
0.00%
19.57%
10.62%
18.23%
Salaries & Benefits
Rent
Travel
Non-paid Consultant Travel
Telecommunications
Training
Insurance
Board/Panel Services
Administration & Office
(Software Maint & Support, Printing &
Stationery, Postage)
Other Administrative Services
Furniture/Equipment
EDP Hardware/Software
Dept of Insurance Examination
Total Operating Expenses
(b)
$
15,551,175
$
10,000
150,000
75,000
260,000
190,000
395,000
145,000
50,000
40,000
100,000
190,000
1,605,000
California Earthquake Authority
$
-
$
-
$
-
$
-
$
15,551,175
$
10,000
150,000
75,000
260,000
190,000
395,000
145,000
50,000
40,000
100,000
190,000
1,605,000
Governing Board Meeting
$
9,727,273
$
75,674
84,000
74,756
18,345
19,571
20,182
292,528
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
31
Item 5: Financial Report
CALIFORNIA EARTHQUAKE AUTHORITY
Insurance Services
Budgeted and Actual Expenditures
2014 Budget Year
(a)
Approved
2014 Budget
1/1/2014
Contracted Services
Agent Services
Audit Services
1
IT Services
Legal Services - Claims Counsel
Legal Service - Non-Claims
Marketing Services
Modeling Services
Rating Agencies
Staffing Services - Support and Admin
Other Contracted Services
Total Contracted Services
$
Research
Participating Insurer Commissions
Participating Insurer Operating Costs
Investment Expenses
Financing Expenses
Risk Transfer
Total Expenditures
1
$
70,000
109,000
2,591,005
300,000
7,355,000
8,878,000
711,000
197,350
3,106,214
50,000
23,367,569 $
(b)
Adjustments
thru 09/30/2014
- $
(c)
Augmentations
thru 09/30/2014
(d)
(d=a+b+c)
2014 Budget after
Augmentations
and Adjustments
273,466
273,466 $
70,000
109,000
2,864,471
300,000
7,355,000
8,878,000
711,000
197,350
3,106,214
50,000
23,641,035 $
(e)
(f)
(f=d-e)
(g)
(g=e/d)
Augmented & Adjusted
Actual Approved Budget (d) vs.
Percentage used of
Expenditures
Actual Expenses (e) Augmented & Adjusted
as of 09/30/2014
as of 09/30/2014 Approved 2014 Budget
43,246
82,500
886,626
1,208,594
2,860,204
372,500
197,300
2,114,027
7,764,997 $
26,754
26,500
1,977,845
300,000
6,146,406
6,017,796
338,500
50
992,187
50,000
15,876,038
61.78%
75.69%
30.95%
0.00%
16.43%
32.22%
52.39%
99.97%
68.06%
0.00%
32.85%
200,000
-
-
200,000
198,099
1,901
99.05%
56,742,287
17,533,367
2,422,156
5,079,788
222,221,550
-
-
56,742,287
17,533,367
2,422,156
5,079,788
222,221,550
46,346,478
14,301,225
1,651,199
4,187,902
148,535,893
10,395,809
3,232,142
770,957
891,886
73,685,657
81.68%
81.57%
68.17%
82.44%
66.84%
344,722,892 $
- $
- $
344,996,358 $
233,005,594 $
111,990,764
67.54%
Augmentation due to board approved upgrade in CEA IT infrastructure.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
32
Item 5: Financial Report
CALIFORNIA EARTHQUAKE AUTHORITY
Mitigation
Budgeted Expenditures and Actual Expenditures
2014 Budget Year
(a)
(b)
(c)
(d)
(d=a+b+c)
(e)
(f)
(f=d-e)
(g)
(g=e/d)
Augmented & Adjusted
Actual Approved Budget (d) vs.
Percentage used of
Expenditures
Actual Expenses (e) Augmented & Adjusted
as of 09/30/2014
as of 09/30/2014 Approved 2014 Budget
Approved
2014 Budget
1/1/2014
Adjustments
thru 09/30/2014
Augmentations
thru 09/30/2014
2014 Budget after
Augmentations
and Adjustments
647,379
33,120
50,000
5,000
10,800
22,880
113,600
-
-
647,379
33,120
50,000
5,000
10,800
22,880
113,600
284,249
23,609
19,543
4,859
10,005
29,079
363,130
9,511
30,457
5,000
5,941
12,875
84,521
43.91%
71.28%
39.09%
0.00%
44.99%
43.73%
25.60%
1,000
-
-
-
1,000
-
389
139
611
(139)
38.90%
0.00%
Salaries & Benefits
Rent
Travel
Non-paid Consultant Travel
Telecommunications
Training
Administration & Office
(Software Maint & Support, Printing
& Stationery, Postage)
Furniture/Equipment
EDP Hardware/Software
Total Operating Expenses
$
883,779 $
- $
-
$
883,779
$
371,872
$
511,907
42.08%
Consulting Services
Other Consulting Services
Total Consulting Services
$
100,000
100,000 $
- $
-
$
100,000
100,000 $
-
$
100,000
100,000
0.00%
0.00%
Contracted Services
Legal Services - Non-Claims
Mitigation Projects
Staffing Services - Support and Admin
Other Contracted Services
Total Contracted Services
$
50,000
850,000
222,436
50,000
1,172,436 $
- $
-
$
50,000
743,736
154,801
50,000
998,537
0.00%
12.50%
30.41%
0.00%
14.83%
-
-
-
-
-
-
0.00%
16,800
-
-
16,800
15,337
1,463
91.29%
- $
-
1,611,907
25.82%
CRMP Contribution
Investment Expenses
Total Expenditures
$
California Earthquake Authority
2,173,015 $
$
$
50,000
850,000
222,436
50,000
1,172,436
2,173,015
Governing Board Meeting
$
$
106,264
67,635
173,899
561,108
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
33
Item 5: Financial Report
California Earthquake Authority
Available Capital Report
as of September 30, 2014
Cash & Investments (includes capital contributions and premiums)
$ 5,199,970,609 *
Interest, Securities & Restricted Securities Receivable
$
14,898,219
Premium Receivable
$
50,732,714
Risk Capital Surcharge & Capital Contributions Receivable
$
-
Other Assets
$
62,022
Revenue Bonds
$
(314,148,432)
Debt Service (Interest, Principal & Debt Service (Min. Bal.))
$
(27,397,099)
Unearned Premium Collected
$
(232,239,237)
Accrued Reinsurance Premium Expense
$
(4,402,804)
Accounts and Securities Payable, and Accrued Expenses
$
(2,605,358)
Claim Reserves
$
(2,000,000)
CEA Available Capital
$ 4,682,870,635
* Does not include Earthquake Loss Mitigation Fund cash and investments of $23,958,679
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
34
Item 5: Financial Report
California Earthquake Authority
Claim-Paying Capacity
As of September 30, 2014
Post Earthquake
Industry
Assessment
Post Earthquake
Industry
Assessment
$312
("NewIAL”)
IAL")
(“New
Post Earthquake
Industry
Assessment
Post Earthquake
Industry
Assessment
("2nd IAL")
(“2nd IAL”)
Revenue-Bond
Proceeds
Revenue
Bonds
Risk-Transfer
Risk-Transfer
$1,656
$314
$3,556
$2.0M
CEA Available
Capital
CEA Available
Capital
$4,683
Claim
Claims Reserves
Reserves
$2.0M
drawn to
*Not*Not
drawn
toscale
scale
A.M. Best Rating 'A-' since
California Earthquake Authority
Total Capacity $10,521M
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
35
Item 5: Financial Report
California Earthquake Authority
Risk-Transfer Program
as of December 1, 2014
Traditional Reinsurance Contracts
Contract Period
Reinsurance Limit
12-Month
Rate-on-Line
12-Month
Premium
2014 January Program Contract 1
January 1, 2014 - December 31, 2014
460,758,100
5.40%
24,880,937
2014 January Program Contract 2
January 1, 2014 - December 31, 2014
50,000,000
4.95%
2,475,000
2014 January Program Contract 3
January 1, 2014 - December 31, 2014
99,999,960
6.75%
6,749,997
2014-2015 January Program Contract 1 January 1, 2014 - December 31, 2015
454,227,620
5.50%
24,982,519
2014-2015 January Program Contract 2 January 1, 2014 - December 31, 2015
49,999,996
6.45%
3,225,000
2013-2015 April Program Contract 2
April 1, 2013 - March 31, 2015
84,999,960
5.30%
4,504,998
2014-2015 April Program Contract 1
2014-2015 April Program Contract 1
Additional Capacity
April 1, 2014 - March 31, 2015
518,583,000
3.70%
19,187,571
October 1, 2014 - March 31, 2015
202,999,520
3.70%
3,755,491
2014-2016 April Program Contract 1
April 1, 2014 - March 31, 2016
253,099,320
3.85%
9,744,324
2014-2016 April Program Contract 2
April 1, 2014 - March 31, 2016
122,499,960
3.75%
4,593,749
2013-2016 May Program
May 1, 2013 - April 30, 2016
100,000,000
5.60%
5,600,000
2013-2015 June Program
June 1, 2013 - May 31, 2015
50,000,000
5.65%
2,825,000
2012-2015 September Program
September 1, 2012 - August 31, 2015
100,000,000
5.70%
5,700,000
2013-2015 August Program Contract 3 August 1, 2013 - July 31, 2015
250,000,000
5.90%
14,750,000
2014-2015 August Program Contract 1 August 1, 2014 - July 31, 2015
187,500,000
4.80%
9,000,000
2014-2015 August Program Contract 2 August 1, 2014 - July 31, 2015
187,500,000
6.00%
11,250,000
136,500,000
4.50%
6,142,500
2014-2015 August Program Contract 3 August 1, 2014 - July 31, 2015
Total Traditional Reinsurance
Transformer Reinsurance Contracts
3,308,667,436
Contract Period
Reinsurance Limit
12-Month
Rate-on-Line
12-Month
Premium
Embarcadero Contract 2 (2012 - I)
February 7, 2012 – February 13, 2015
150,000,000
7.440%
11,159,145
Embarcadero Contract 3 (2012 - II)
August 1, 2012 – August 7, 2015
300,000,000
5.040%
15,121,864
URSA Re Contract 1
December 1, 2014 - November 30, 2017
200,000,000
5.050%
10,100,000
URSA Re Contract 2
December 1, 2014 - November 30, 2017
200,000,000
3.535%
7,070,000
Total Transformer Reinsurance
Total Risk-Transfer Program
California Earthquake Authority
850,000,000
4,158,667,436
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
36
Item 5: Financial Report
California Earthquake Authority
Schedule of Outstanding Debt
ISSUANCE
OUTSTANDING
NET
INTEREST RATE
AS OF DATE
AMOUNT
PRINCIPAL
PROCEEDS
Series 2006 Revenue Bonds $ 315,000,000
6.169%
$ 310,829,067 $ 63,000,000
31-Aug-2014
*Interest and principal fully funded in escrow account for remaining interest and principal payments
DEBT
DEBT-SERVICE SCHEDULE
The table below shows the payments remaining to bond holders by the Trustee, from escrow funds for the Series 2006 Bond
Period
Ending
1-Jan-15
1-Jul-15
2015
1-Jan-16
1-Jul-16
2016
Outstanding
Principal
$63,000,000
$31,500,000
Principal
$31,500,000
Interest
$1,943,235
$1,943,235
Debt Service
$1,943,253
$33,443,235
Annual
Debt Service
$35,386,488
$31,500,000
$31,500,000
$971,618
$971,618
$971,618
$32,471,618
$33,443,236
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
37
Item 5: Financial Report
California Earthquake Authority
Schedule of Outstanding Debt
DEBT
Series 2014 Revenue Bonds
2 year bond CUSIP 13017HAC0
ISSUANCE
AMOUNT
$ 40,000,000
INTEREST
RATE
1.194%
NET
OUTSTANDING
PROCEEDS
PRINCIPAL
$ 39,665,642 $ 40,000,000
MOODY'S
RATING*
AS OF DATE
7-Nov-2014
A3
Outlook Stable
FITCH
RATING*
A
Outlook Stable
DEBT-SERVICE SCHEDULE
The table below shows the annual-debt-service requirements for the Series 2014 Bonds.
Period Ending
7-Nov-14
31-Dec-14
2014
1-Jan-15
1-Jul-15
2015
1-Jan-16
1-Jul-16
2016
Outstanding
Principal
$40,000,000
$40,000,000
Principal
Interest
Debt Service
$71,640
$238,800
$71,640
$238,800
Annual
Debt Service
$0
$40,000,000
$40,000,000
$310,440
$40,000,000
$40,000,000
$238,800
$238,800
$238,800
$40,238,800
$40,477,600
*Ratings of 'A3' and 'A' since 2006 (These ratings were reaffirmed in 2014)
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
38
Item 5: Financial Report
California Earthquake Authority
Schedule of Outstanding Debt
ISSUANCE
AMOUNT
DEBT
Series 2014 Revenue Bonds $ 60,000,000
3 year bond CUSIP 13017HAD8
INTEREST
RATE
1.824%
NET
OUTSTANDING
PROCEEDS
PRINCIPAL
$ 59,498,463 $ 60,000,000
MOODY'S
AS OF DATE
RATING*
7-Nov-2014
A3
Outlook Stable
FITCH
RATING*
A
Outlook Stable
DEBT-SERVICE SCHEDULE
The table below shows the annual-debt-service requirements for the Series 2014 Bonds.
Period Ending
7-Nov-14
31-Dec-14
2014
1-Jan-15
1-Jul-15
2015
1-Jan-16
1-Jul-16
2016
1-Jan-17
1-Jul-17
2017
Outstanding
Principal
$60,000,000
$60,000,000
Principal
Interest
Debt Service
Annual
Debt Service
$0
$60,000,000
$60,000,000
$164,160
$547,200
$164,160
$547,200
$711,360
$60,000,000
$60,000,000
$547,200
$547,200
$547,200
$547,200
$60,000,000
$547,200
$547,200
$547,200
$60,547,200
$1,094,400
$60,000,000
$61,094,400
*Ratings of 'A3' and 'A' since 2006 (These ratings were reaffirmed in 2014)
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
39
Item 5: Financial Report
ISSUANCE
AMOUNT
DEBT
Series 2014 Revenue Bonds $ 250,000,000
5 year bond CUSIP 13017HAE6
California Eathquake Authority
Schedule of Outstanding Debt
INTEREST
RATE
2.805%
OUTSTANDING
NET
PRINCIPAL
PROCEEDS
$ 247,910,261 $ 250,000,000
AS OF DATE
7-Nov-2014
MOODY'S
RATING*
A3
Outlook Stable
FITCH
RATING*
A
Outlook Stable
DEBT-SERVICE SCHEDULE
The table below shows the annual-debt-service requirements for the Series 2014 Bonds.
Period Ending
7-Nov-14
31-Dec-14
2014
1-Jan-15
1-Jul-15
2015
1-Jan-16
1-Jul-16
2016
1-Jan-17
1-Jul-17
2017
1-Jan-18
1-Jul-18
2018
1-Jan-19
1-Jul-19
2019
Outstanding
Principal
$250,000,000
$250,000,000
Principal
Interest
Debt Service
$250,000,000
$250,000,000
$1,051,875
$3,506,250
$1,051,875
$3,506,250
$250,000,000
$250,000,000
$3,506,250
$3,506,250
$3,506,250
$3,506,250
$250,000,000
$210,000,000
$40,000,000
$3,506,250
$3,506,250
$3,506,250
$43,506,250
$210,000,000
$105,000,000 $105,000,000
$2,945,250
$2,945,250
$2,945,250
$107,945,250
$105,000,000
$1,472,625
$1,472,625
$1,472,625
$106,472,625
$0
$4,558,125
$7,012,500
$47,012,500
$110,890,500
$105,000,000
$107,945,250
*Ratings of 'A3' and 'A' since 2006 (These ratings were reaffirmed in 2014)
California Earthquake Authority
Annual
Debt Service
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
40
Item 5: Financial Report
California Earthquake Authority
Claim-Paying Capacity
As of September 30, 2014
Post Earthquake
Industry
Assessment
Post Earthquake
Industry
Assessment
$312
("NewIAL”)
IAL")
(“New
Post Earthquake
Industry
Assessment
Post Earthquake
Industry
Assessment
("2nd IAL")
(“2nd IAL”)
Revenue Bond
Proceeds
Revenue
Bonds
Risk-Transfer
Risk-Transfer
$1,656
$314
2014 Revenue Bond Proceeds,
as of November 7, 2014
$347M
$3,556
$2.0M
CEA Available
Capital
CEA Available
Capital
$4,683
Claim
Claims Reserves
Reserves
$2.0M
drawn to
*Not*Not
drawn
toscale
scale
A.M. Best Rating 'A-' since
California Earthquake Authority
Total Capacity $10,521M
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
41
Item 6: Proposed 12-month CEA Risk-Transfer Strategy for 2015
M
r. Richison will present and seek Board approval of
the revised Guidelines for Securing Risk-Transfer:
Traditional Reinsurance and Alternative Risk-Transfer and
approval of the proposed 12-month CEA Risk-Transfer
Strategy for 2015.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
42
Item 6: Proposed 12-month CEA Risk-Transfer Strategy for 2015
2014 Risk-Transfer Update
Governing Board approved 2014 Risk-Transfer Strategy
at December 2013 meeting.
• Staff has since conducted 13 risk-transfer transactions.
• Total risk-transfer limit purchased: $3,365,494,200
• Six multi-year contacts purchased, totaling
$1,279,826,896 (41% of total CEA risk-transfer limit
purchased in 2014).
• New transformer reinsurance contract effective
December 1, 2014, for a 3-year term, total of
$400,000,000 limit.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
43
Item 6: Proposed 12-month CEA Risk-Transfer Strategy for 2015
Proposed Revised Guidelines for Securing Risk-Transfer:
Traditional Reinsurance and Alternative Risk-Transfer
The CEA’s Guidelines for Securing Risk-Transfer:
Traditional Reinsurance and Alternative Risk-Transfer (the
Guidelines) are being revised to more accurately align
(for comparison purposes) the reinsurer ratings of
Moody’s, A.M. Best, and Standard & Poor’s.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
44
Item 6: Proposed 12-month CEA Risk-Transfer Strategy for 2015
Proposed 12-month CEA Risk-Transfer Strategy
• The Guidelines state the goals and objectives for
optimal sources of claim-paying capacity.
• The proposed 12-month CEA Risk-Transfer Strategy for
2015 will include risk-transfer programs of traditional
and transformer reinsurance, and a total claimpaying capacity set (at a minimum) to a 1-in-450-year
level and, at a maximum, to a 1-in-550-year level.
• Staff will report to the Board about new transactions
at the first Board meeting following the effective date
of each transaction.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
45
Item 6: Proposed 12-month CEA Risk-Transfer Strategy for 2015
Guidelines revisions and Proposed 12-month CEA Risk-
Transfer Strategy
RECOMMENDATIONS:
• Approve the revised CEA Guidelines for Securing
Risk-Transfer: Traditional Reinsurance and Alternative
Risk-Transfer
• Approve the proposed 12-month CEA Risk-Transfer
Strategy for 2015
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
46
Item 7: Annual Report on the State of the Economy
M
r. Richison will introduce, Kapil Bhatia, Managing
Director of Public Finance, Raymond James &
Associates, Inc. (the CEA’s independent financial
advisor), to present the advisor’s annual report on the
state of the economy.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
47
Economic, Financial,
Investment, and Risk
Transfer Market Overview
Prepared for:
December 17, 2014
Kapil Bhatia
Managing Director, Public Finance
Raymond James & Associates, Inc.
Ph: 727-567-1791
Email: [email protected]
Section 1
Economic Overview
Section 2
Financial Market Overview
Section 3
Risk Transfer Market Overview
Section 4
CEA Investment Portfolio
Section 1:
Economic Overview
EXECUTIVE
FINANCIAL
SUMMARY
MARKET UPDATE
• Domestic economic
sluggishness, regulatory
reform, turmoil in the
Ukraine, European and
Asian financial crises,
and Federal Reserve
actions have combined
to create a volatile
financial market
environment, which
have dampened global
growth

The recession has been technically over since 2009, but economic fundamentals remain weak –
longest downturn since World War II

The Federal Reserve has taken action through multiple Quantitative Easings to stimulate economic
growth by maintaining short-term interest rates at historic lows and is expected to continue to
maintain them until middle to late 2015

The equity markets are having a record year with the DJIA and S&P 500 increasing year-to-date by 7%
and 11%, respectively, and 169% and 201%, respectively, versus the lows of March 2009

U.S. corporate bond issuance has totaled $1.4 trillion through November 2014, which is 3.1% higher
than the issuance over the same period in 2013. 2014 will be the fifth straight year of $1 trillion+
issuance

The U.S. economy grew at a much faster pace than initially thought in the third quarter, pointing to
strengthening fundamentals that should help it weather slowing global demand – the estimate of
GDP growth in the third quarter is 3.9%, which is up from the 3.5% rate reported last month,
reflecting upward revisions to business and consumer spending, as well as to inventories

The rise in output followed a 4.6% advance in the prior three months to mark the two
strongest back-to-back quarters since the second half of 2003

The growth in the U.S. economy underscored the resilience of the U.S. against a backdrop of a
Japanese recession, an anemic Euro Zone and a slowing China
52
GLOBAL
FINANCIAL
ECONOMY
MARKET
UPDATE
UPDATE

• Some of the world’s
largest economies, such
as China, Japan, and
many countries in the
Euro Zone, are
struggling with
shrinking growth and
low inflation or
deflation

• Concern that economic
recoveries from the U.S.
to Europe and Japan are
failing to spur inflation
has been cited by
central bankers
worldwide as
justification for
continued monetary
stimulus efforts

Japan's economy shrank 1.6% at an annual rate in the July-September period. The Japanese economy's
disappointing performance followed a 7.3% contraction in the previous quarter

Economists attribute the downturn to an April hike in the country's sales tax, to 8% from 5%, that
helped narrow a massive budget deficit but chilled consumer spending

Japan emerged from a 20-year period of stagnation in 2013 following Prime Minister Abe's
decision to pump money into the financial system and lower interest rates through bond purchases
similar to the U.S. Federal Reserve's quantitative easing program
Euro Zone gross domestic product expanded just 0.2% last quarter and inflation is running at 0.4%, well
below the European Central Bank’s (“ECB”) goal of just under 2%. As a result, Mario Draghi strengthened
his stimulus pledge for the euro area by saying the ECB can’t hold back in its fight to revive the economy

Overall, the $12 trillion Euro Zone economy – second only to the U.S. in size – is stuck with almost
no growth or inflation to mend its imbalances, reduce high public and private debts, or significantly
cut its chronic unemployment

The ECB is trying to boost the size of its balance sheet to early-2012 levels, signaling an increase of
as much as €1 trillion ($1.24 trillion), to help revive the euro-area economy – to keep the region
from slipping into deflation, the ECB has been pumping money into the banking system by buying
covered bonds and offering cheap long-term loans to banks

Draghi has declined to rule out large-scale government-bond buying and reiterated that ECB staff
are studying further measures to boost the economy if needed
China cut benchmark interest rates for the first time since July 2012, stepping up efforts to support the
world’s second-largest economy – China's annual growth slowed to 7.3% in the third quarter, leaving 2014
on track to be the slowest in 24 years
53
U.S.FINANCIAL
ECONOMYMARKET
UPDATEUPDATE
• The improving
economic picture in the
U.S. is in contrast with
weakness in Europe and
Asia
• Declining energy and
commodity prices
against the backdrop of
a slowing global
economy, and a
strengthening dollar are
keeping inflation below
the Fed's target of 2%
• In October, the Federal
Reserve ended its
Quantitative Easing
program, setting the
stage for the Fed to
begin tightening
monetary conditions,
though the market
doesn't expect the Fed
to raise rates until at
least mid-2015

Underlying inflation pressures rose in October, even as falling gasoline prices kept overall U.S. consumer
prices in check, bolstering expectations of a mid-2015 interest rate hike from the Federal Reserve

Prices in the U.S. excluding fuel and food increased more than forecast in October as a drop in
energy costs failed to filter through to other goods and services – the core measure of the
consumer-price index climbed 0.2%, the most in five months, after rising 0.1% in September

The National Association of Realtors said existing home sales rose 1.5% to an annual rate of 5.26 million
units, the highest rate since September 2013, a sign that the housing market continued to regain strength

The U.S. economy added 321,000 jobs in November (the largest one month gain in nearly three years),
and as of November the unemployment rate is 5.8% - the lowest rate since July 2008


Employers have now added at least 200,000 jobs for ten straight months, the longest such stretch
since 1995

U.S. Private Sector has added 10.9 million jobs since 2010
Employers are laying off fewer workers and have stepped up hiring this year – the weekly applications,
which are a proxy for layoffs, have fallen 16% in the past 12 months


They are close to the lowest levels since 2000, a sign companies are more confident in the
economy and willing to hold onto their staffs
The number of people receiving unemployment benefits has also fallen steadily, and now stands at 2.33
million, the lowest since December 2000. Yet there are still 9 million people unemployed. Almost onethird have been out of work for six months or longer and are no longer eligible for unemployment benefits
54
U.S.FINANCIAL
ECONOMYMARKET
UPDATEUPDATE
(CONTINUED)

The U.S. energy industry is undergoing a revolution that is expected to have a significant and enduring
impact on the nation’s economy and energy self-sufficiency. The progress made in advanced drilling
techniques over the past few years has allowed for unprecedented access to oil and natural gas
reserves in North America – given increased domestic production, U.S. dependence on foreign oil
continues to decline

There is a new industrial revolution in the U.S. highlighted by an energy and manufacturing boom – in
October, the Institute for Supply Management’s index of manufacturing activity rose to match its
three-year high
• Falling oil prices have
created a growth
opportunity for the U.S.
to increase its own
domestic production
and rely less on foreign
oil

The outlook for manufacturing is positive despite a strengthening dollar making products less
competitive globally

The increase in manufacturing may reflect an economy that has entered a healthier stage, with
increased hiring encouraging consumers to spend more, with better spending encouraging
companies to step up production and stronger production necessitating yet more hiring

There is a slack in the labor and capital markets, record low level of labor participation, and
historically low interest rates. The labor prospects for the long-term unemployed decline further the
longer they remain unemployed, which can cause their skills to atrophy

Economic growth alone will not be enough to get everyone into work – supply-side structural reforms,
such as job training, are also needed
55
THEFINANCIAL
OFFICIAL UNEMPLOYMENT
RATE IS DECREASING BUT STRUCTURAL UNEMPLOYMENT REMAINS HIGH
MARKET UPDATE
U-3 is the official unemployment rate (i.e., the unemployed, as a percent of the civilian labor force)

The broadest measure of labor underutilization, called U-6, includes the unemployed, the
marginally employed, and persons who are actually employed but who work fewer hours than they
would like (sometimes referred to as underemployed)
The Natural Rate of Unemployment is the rate of unemployment when the labor market is in equilibrium –
it is the difference between those who would like a job at the current wage rate and those who are willing
and able to take a job. It therefore includes frictional unemployment and structural unemployment (i.e. a
worker who is not able to get a job because he doesn’t have the right skills)
• Analyzing the gap
between the official
unemployment rate (U3) and the broadest
measure of labor
underutilization (U-6)
provides extra insight
into whether the
economy is healing
U.S. Unemployment Rates
20%
18%
U-6 (Total Unemployment Rate)
16%
14%
7.3%
12%
6.6%
U-3 (Official Unemployment Rate)
10%
5.7%
8%
3.8%
6%
Natural Rate of Unemployment
4%
2%
Jan-14
Jun-14
Aug-13
Oct-12
Mar-13
May-12
Jul-11
Dec-11
Feb-11
Apr-10
Sep-10
Nov-09
Jan-09
Jun-09
Aug-08
Oct-07
Mar-08
May-07
Jul-06
Dec-06
Feb-06
Apr-05
Sep-05
0%
Source: Bureau of
Labor Statistics
Nov-04


Jan-04
• While the official
unemployment rate
remains the primary
measure of changes in
labor underutilization,
the alternative
measures provide
different views of the
extent to which the
economy is not fully
utilizing its labor
resources
There are few alternative measures of labor underutilization. There is the official unemployment rate (U-3)
and three broader measures (U-4, U-5 and U-6), which incorporate individuals who are not captured in the
official measure:
Jun-04

56
LABOR
FORCE PARTICIPATION
IS LAGGING
FINANCIAL
MARKET UPDATE
 The labor force participation rate stands at 62.8%, which is the lowest rate since 1978
68%
67%
66%
65%
64%
63%
62%
61%
Source: Bureau of Labor Statistics
Jan-14
Jun-14
Aug-13
Mar-13
Oct-12
May-12
Jul-11
Dec-11
Feb-11
Sep-10
Apr-10
Nov-09
Jan-09
Jun-09
Aug-08
Mar-08
Oct-07
May-07
Jul-06
Dec-06
Feb-06
Sep-05
Apr-05
Nov-04
60%
Jan-04
• The decline in the labor
participation rate
explains structural
unemployment
Labor Participation Rate
Jun-04
• There are still 9 million
people unemployed
and almost one-third
have been out of work
for six months or longer
and are no longer
eligible for
unemployment benefits
 The labor force participation rate has fallen due to cyclical factors such as workers temporarily
dropping out of the workforce because of discouragement over job prospects, but also due to
structural forces such as the Baby Boomers reaching retirement age, younger workers staying in
school longer, and a need to re-train labor skill sets to match the demands of the industrial and
energy booms
57
U.S.FINANCIAL
HOUSEHOLD
MARKET
DEBT UPDATE
 Total household debt increased $175 billion in the second quarter to $471 billion. The
increase was led by rising mortgage and auto loans
 Household debt is significantly lower than the highs seen in 2005 and 2006
• Consumer spending is
only marginally helping
economic growth
 The personal savings rate has increased from 1.9% in July 2005 to the current rate of 5.0%
Household Debt by Category as a Percentage of GDP
10%
8%
0.9%
0.7%
0.8%
6%
1.0%
% of GDP
• Even though wages
remain largely stagnant,
Americans are slowly
but steadily borrowing
more money, bringing
to an end a five-year
effort to cut household
debt that has slowed
consumer spending and
the economy
4%
6.8%
7.4%
6.8%
4.9%
2%
0.2%
0.6%
0%
2004
2005
2006
2007
2008
0.5%
2009
-0.7%
2010
-1.2%
-0.2%
0.7%
-0.5%
2011
1.1%
-0.4%
2012
1.6%
1.1%
0.2%
0.0%
2013 2014 Q2
-2%
Household - Home Mortgage
Source: Federal Reserve
Household - Consumer Credit
58
FEDERAL RESERVE ASSETS
Federal Reserve Assets
5,000
• Since the beginning of
the financial market
turmoil in August 2007,
the Federal Reserve's
balance sheet has grown
in size and has changed
in composition
• The total assets of the
Federal Reserve are over
twice the government
expenditures for all 50
states
4,000
3,500
($ in Billions)
• Total assets of the
Federal Reserve have
increased almost 5x from
$870 billion in August
2007, to over $4.4 trillion
4,500
3,000
2,500
2,000
1,500
1,000
500
Aug-07
Source: Federal Reserve
Aug-08
Aug-09
Aug-10
Aug-11
Aug-12
Aug-13
Aug-14
59
Section 2:
Financial Market Overview
BOND
FINANCIAL
MARKETS
MARKET UPDATE

U.S. corporate bond issuance has totaled $1.4 trillion through November 2014, which is 3.1% higher than
the issuance over the same period in 2013


• 2014 has been a banner
year for corporate
bonds with worldwide
issuance of $3.8 trillion
on pace to exceed $4
trillion for the first time
Alibaba Group Holding Ltd. sold $8 billion of bonds in its debut sale at yields that were lower than
originally offered after the Chinese e-commerce company got at least $57 billion of orders from investors


Apple Inc. issued $12 billion of bonds to buy back equity to increase its return on equity


Alibaba sold the largest portions in equal $2.25 billion offers of 5 and 10-year notes – the 2.5%,
five-year notes sold at a yield of 0.95% above similar-maturity Treasuries and the 3.6%, 10-year
securities sold at a relative yield of 1.28% basis points above similar-maturity Treasuries
The sale included $2.5 billion of 3.45%, 10-year notes that pay 0.77% more than similar-maturity
Treasuries
Municipal issuance is comparatively lower in 2014 than in 2013 – issuance through November 2014 totals
$296 billion and is 4.0% lower than the $308 billion issued over the same period in 2013
Historical Corporate and Municipal Bond Issuance
1,600
1,400
1,200
Issuance ($in Billions)
• Historically low interest
rates have led to record
setting corporate bond
issuance amid strong
investor demand
Through November 2014, $1.1 trillion, or 75%, has been non-convertible investment grade debt
and $305 billion, or 25%, has been non-convertible junk bond debt
1,000
800
600
400
200
-
Source: SIFMA
Corporate
Municipal
61
GLOBAL
FINANCIAL
INTEREST
MARKET
RATESUPDATE
 As there is financial unrest in Europe and Asia, the U.S. is a relatively safer alternative and
is attractive from a yield standpoint relative to other countries
10-Year Government Bond Yields
5.00%
4.50%
• Global interest rates are
near historic lows and
are also well below
historic averages
4.32%
4.29%
4.00%
3.50%
3.63%
3.33%
3.24%
3.00%
2.50%
2.34%
2.27%
2.02%
2.00%
1.50%
1.33%
1.22%
1.01%
0.74%
0.50%
0.41%
United
States
Germany
Italy
Current
Source: Bloomberg
1.97%
1.84%
1.00%
0.00%
3.20%
Spain
Japan
10-Year Average
France
Canada California
GO
(TaxExempt)
62
U.S.FINANCIAL
INTEREST MARKET
RATES UPDATE
6.00%
• U.S. annual inflation
rate was recorded at
1.7% for the third
consecutive month in
October, as the fall in
energy prices was
enough to offset higher
food and shelter cost
• The gauge of investors'
long-term inflation
expectations, as
measured by the yield
gap between 10-year
TIPS and regular 10-year
Treasury notes is
currently 1.79%
10-Year Treasury Inflation-Indexed Security and 10-Year Treasury Rate
5.00%
4.00%
10-Year Treasury
Rate
2.28%
3.00%
2.00%
2.00%
1.79%
1.00%
0.00%
2004
2.40%
2005
-1.00%
-2.00%
Source: Federal Reserve
2006
2007
2008
2009
2010
2011
2012
2013
2014
10-Year Treasury
Inflation-Indexed
Security
63
Section 3:
Risk Transfer Market
Overview
CATASTROPHE
FINANCIAL MARKET
BOND MARKET
UPDATEOVERVIEW
Catastrophe bond issuance for the first half of the year was the highest on record, exceeding the prior
year period by almost 50% and reflecting continued strong demand both from sponsors and investors

Despite a slow third quarter, catastrophe bond issuance for 2014 could surpass the annual market
peak set in 2007

Increased issuance in 2014 has enabled investors to add a variety of perils and regions to their
catastrophe bond portfolios, including European windstorm, Japanese earthquake, Japanese typhoon
and Texas hurricane

Investors were also receptive to new currencies, as Aozora Re Ltd. launched the first catastrophe bond
denominated in Japanese yen
Risk Capital Issued and Outstanding
25,000
23,249
20,352
20,000
Risk Capital Amount ($MM)
• Due to record setting
issuance in 2014, total
outstanding risk capital
projected at year-end
for 2014 currently
stands at $23.2 billion

16,538
15,000
16,106
14,024
12,044
12,509
12,185
12,139
10,287
5,784
10,000
5,000
8,542
4,904
9,357
3,858
4,683
1,991
2005
9,117
7,851
7,924
4,334
4,215
2010
2011
8,240
2,913
-
12,710
2006
2007
2,687
3,392
2008
2009
Risk Capital Issued
Risk Capital Outstanding Year-End
6,251
2012
7,642
7,143
2013
2014YTD
65
CATASTROPHE
FINANCIAL MARKET
BOND PRICING
UPDATE
Catastrophe Bond Transactions Since May 2014
• Catastrophe bond
pricing, including Ursa
Re, has remained at
historic lows in 2014, as
investor demand in this
low interest rate
environment has far
exceeded the increased
supply, allowing
sponsors to expand
coverage at competitive
rates
Issuer
Cedent
Ursa Re Ltd. (Series 2014-1) - Class California Earthquake
B
Authority
Ursa Re Ltd. (Series 2014-1) - Class California Earthquake
A
Authority
Kilimanjaro Re Ltd. (Series 2014-2) Everest Re
Golden State Re II Ltd. (Series 2014- California State
Compensation Insurance
1)
Fund
Alamo Re Ltd. (Series 2014-1)
Hannover Rück SE, on
behalf of reinsured Texas
Windstorm Insurance
Association (TWIA)
Perils Covered
California earthquake
1.20% [3.00%-3.75%] 3.38%
3.50%
3.70%
2.9
$150
$200
33%
Nov-14
U.S and Canada earthquake
Workers compensation claims
resulting from California earthquakes
1.46% [3.50%-4.00%] 3.75%
0.25% [2.20%-2.70%] 2.45%
3.75%
2.20%
0.00%
-10.20%
2.6
8.8
$350
$150
$500
$250
43%
67%
Nov-14
Sep-14
Texas named storms
2.84% [6.50%-7.00%] 6.75%
6.35%
-5.93%
2.2
$300
$400
33%
Jun-14
0.54% [2.75%-3.50%] 3.13%
3.50%
12.00%
6.5
$50
$50
0%
May-14
15.00%
0.00%
1.5
$50
$80
60%
May-14
0.78% [3.50%-4.00%] 3.75%
3.90%
4.00%
5.0
$150
$200
33%
May-14
U.S. tropical cyclones, earthquakes,
severe thunderstorms, winter storms,
wildfire, meteorite impact, volcanic
eruption
Residential Reinsurance 2014 Ltd. USAA
U.S. tropical cyclones, earthquakes,
(Series 2014-1) - Class 10
severe thunderstorms, winter storms,
wildfire, meteorite impact, volcanic
eruption
Sanders Re Ltd. (Series 2014-2)
Allstate subsidiaries
Florida named storms, earthquakes,
Castle Key Insurance and severe thunderstorms
Castle Key Indemnity
Sanders Re Ltd. (Series 2014-1) Class D
9.86%
[14.00%-16.00%]
15.00%
Zenkyoren
Japan earthquake
0.75% [2.25%-2.75%] 2.50%
2.50%
0.00%
3.3
$50
$150
200%
May-14
Zenkyoren
Japan earthquake
0.75% [2.25%-2.50%] 2.38%
2.25%
-5.26%
3.0
$150
$150
0%
May-14
Sompo Japan and
Nipponkoa Insurance
Company
Allstate
Japan typhoon
0.52% [2.25%-2.65%] 2.45%
2.00%
-18.37%
3.8
Not
Provided
$100
U.S. named storms (excluding
Florida), U.S. earthquake (CA, NY,
WA)
U.S. named storms (excluding
Florida), U.S. earthquake (CA, NY,
WA)
U.S. named storms (excluding
Florida), U.S. earthquake (CA, NY,
WA)
U.S. named storms (Florida only
initially)
Florida hurricanes
1.13% [3.50%-4.00%] 3.75%
3.90%
4.00%
3.5
$250
$305
22%
May-14
0.72% [3.00%-3.50%] 3.25%
3.25%
0.00%
4.5
$100
$115
15%
May-14
0.72% [2.75%-3.00%] 2.88%
3.00%
4.35%
4.2
$250
$330
32%
May-14
0.46% [3.50%-4.00%] 3.75%
4.00%
6.67%
8.7
$150
$200
33%
May-14
2.30% [6.25%-7.75%] 7.00%
7.50%
7.14%
3.3
$400
$1,500
275%
May-14
Sanders Re Ltd. (Series 2014-1) Class C
Allstate
Sanders Re Ltd. (Series 2014-1) Class B
Allstate
Armor Re Ltd. (Series 2014-1)
Date
Nov-14
California earthquake
Residential Reinsurance 2014 Ltd. USAA
(Series 2014-1) - Class 13
Nakama Re Ltd. (Series 2014-1) Class 2
Nakama Re Ltd. (Series 2014-1) Class 1
Aozora Re Ltd. (Series 2014-1)
Pricing
Pricing
Final vs.
Spread vs. Spread Initial
Final
Initial
Size
Expected Initial Price Guidance Pricing Mid Price Multiple Size
Final Size
(x)
Spread Guidance
($MM) ($MM) ($MM)
Loss
([Min-Max] Mid)
2.62% [4.50%-5.25%] 4.88%
5.00%
2.56%
1.9 $200
$200
0%
American Coastal
Insurance Company
Everglades Re Ltd. (Series 2014-1) Citizens Property
Insurance
May-14
66
SECONDARY
FINANCIALMARKET
MARKETACTIVITY
UPDATE
• Looking forward to
2015, there are
significant maturities in
the first quarter at $3.5
billion, with an
additional $1.5 billion
in the second quarter
• There is continued new
capital flowing into the
ILS market, and investor
demand should be
strong in the first half of
2015 as there will be
approximately $5.0
billion in redemptions,
which in turn will
continue to put
downward pressure on
pricing spreads

Secondary market activity in the second quarter of 2014 is significant as a large volume of new bonds
issued in 2014 resulted in some investors reallocating their portfolios to free-up capital for new
issuances

Investors accessed a record amount of catastrophe bonds in the primary market, with many putting a
large proportion of their funds to work

Secondary market activity has slowed in the third and fourth quarters as issuance has slowed and
there are only $350 million of maturities in the fourth quarter of 2014
Catastrophe Bond Secondary Market Pricing (as of October 31, 2014)
Coupon
Spread
Scheduled
Expected
Maturity
Loss (bps)
Issuer
Rating Coupon (bps) Multiple (x)
Embarcadero Re 2012-1
13-Feb-15
221
BB725
3.28
Pelican Re 2012-11
13-Apr-15
354
NR
1375
3.88
Embarcadero Re 2012-2
07-Aug-15
84
BB+
500
5.95
Everglades 2013-1
28-Mar-16
318
B
945
2.97
Tar Heel 2013-1
09-May-16
277
B+
850
3.07
MetroCat Re 2013-1
05-Aug-16
171
BB450
2.63
Everglades 2014-1
28-Mar-17
268
B
750
2.80
Pelican Re 2013-1
15-May-17
205
NR
600
2.93
Alamo Re 2014-1
07-Jun-17
309
Not Rated
635
2.06
Kilimanjaro Re 2014-1 A 2
30-Apr-18
183
BB475
2.60
Kilimanjaro Re 2014-1 B 2
30-Apr-18
165
BB450
2.73
Source: BNP Paribas secondary market pricing as of October 31, 2014.
1
2
Secondary
Market
Indicative
Offer Spread
(bps)
459
126
200
412
358
177
493
354
411
346
381
Difference
Between
Indicative
Offer Spread
and Coupon
(bps)
-266
-1249
-300
-533
-492
-273
-257
-246
-224
-129
-69
Indicative
Offer Spread
Multiple (x)
2.08
0.36
2.38
1.30
1.29
1.04
1.84
1.73
1.33
1.89
2.31
Maturing prior to the start of the 2015 hurricane season.
There have not been any significant trades.
67
• Record levels of capital
among traditional
reinsurers as well as the
growing capacity
provided by alternative
capital providers and ILS
are softening reinsurance
pricing and broadening
policy terms and
conditions
• As reinsurers are
experiencing lower
profitability, mergers and
acquisitions could be a
faster route to growth or
an improved capital
position
• Bermuda-based
reinsurance firm
RenaissanceRe recently
agreed to acquire
Platinum Underwriters,
which could spur
additional merger and
acquisition activity
among reinsurers
VALUATION METRICS

Public equity valuations remain well below historical averages, but have improved as
the reinsurers are buying back shares

Price / book ratio is almost at par and this may lead to more industry consolidation
Summary Valuation Metrics - Reinsurance Companies
Market
Capitalization Most-Recent Price Change
($MM)
Company Name
Closing Price
YTD (%)
Aspen Insurance Holdings Ltd.
$2,741
$44.05
6.63
AXIS Capital Holdings Ltd.
$5,090
$49.80
4.69
Blue Capital Reinsurance Hldgs
$148
$16.91
(7.95)
EMC Insurance Group Inc.
$410
$30.26
(1.18)
Enstar Group Ltd.
$2,818
$146.78
5.67
Everest Re Group Ltd.
$7,849
$173.46
11.29
Maiden Holdings Ltd.
$935
$12.82
17.29
Montpelier Re Holdings Ltd.
$1,511
$34.85
19.76
PartnerRe Ltd.
$5,716
$116.71
10.70
Platinum Underwriters Holdings
$1,834
$73.83
20.48
RenaissanceRe Holdings Ltd.
$3,760
$97.51
0.17
Third Point Re Ltd.
$1,530
$14.71
(20.62)
Validus Holdings Ltd.
$3,628
$41.52
3.05
XL Group plc
$9,133
$35.39
11.15
Average
Source: SNL Financial, as of December 3, 2014.
Price / Book
(%)
97.00
96.70
84.10
84.30
127.30
106.30
104.00
103.70
93.50
108.00
113.70
104.50
99.90
93.60
101.19
68
RATING AGENCY REINSURANCE INDUSTRY OUTLOOK

• All four rating agencies
have negative outlooks
for the reinsurance
industry due to
challenges such as low
interest rates, slower
demand, and increased
competition due to
alternative capital
All four rating agencies have a negative outlook for the global reinsurance industry

Moody's Investors Service has reinforced its negative outlook on the global
reinsurance sector as fierce competition, over-capacity and low returns continue
to put pressure on the industry, despite some positive developments

Standard & Poor’s believes the increased competition in the global reinsurance
market, created by excess capital which is driving down rates, could threaten the
ratings of global reinsurers and create greater volatility in their earnings

Fitch notes that intense market competition and sluggish cedent demand has
resulted in a softening market for reinsurers. In addition, the high level of
alternative capital leads Fitch to expect that prices will continue to fall, and that
terms and conditions will weaken into 2015 across a wider range of business
lines

A.M. Best is concerned that shrinking margins and more favorable terms being
offered to clients threaten to strain companies’ financial strength
Source: Moody’s, Standard & Poor’s, Fitch’s, and A.M. Best’s respective websites
69
Section 4:
CEA Investment Portfolio
CEAFINANCIAL
INVESTMENT
MARKET
POLICIES
UPDATE
AND PORTFOLIO OVERVIEW
Fund
Purpose
• CEA’s investment
portfolio totals $5.5
billion with an effective
duration of 1.4 years
and is comprised of
liquidity, primary,
claims-paying and
mitigation funds
• The maximum effective
duration pursuant to
the investment policy
for the total portfolio is
1.75 years
Liquidity
Funds to pay for the
operating expenses and
initial claims from an
earthquake
Treasuries /
Up to 100% Treasuries /
Agencies
Max. 50% Agencies
Composition
Maximum Final
181 days
Maturity
$897 million
Current Portfolio
0.07%
1-Year Total Return
0.17 years
Effective Duration
CEA Investment Policy Summary
Primary
Claims-Paying
Mitigation
Funds in excess of the
Bond proceeds from the Funds to pay for the
Liquidity Fund to pay
CEA’s issuance of revenue mitigation program and
claims following an
bonds to pay claims
associated expenses
earthquake
following an earthquake
100% Treasuries
Up to 100% Treasuries /
Max. 50% Agencies
Up to 100% Treasuries /
Max. 50% Agencies
5 years
5 years
91 days
$3.9 billion
0.63%
1.63 years
$664 million
0.83%
2.03 years
$25 million
0.06%
0.11 years
CEA Investment Portfolio Statistics - As of November 30, 2014
Market Composition 12-Month
Value
(% of Mkt.
Total
($000's)
Value)
Return
Fund
Liquidity
$897,373
16.2%
0.07%
Primary
$3,949,767
71.3%
0.63%
Claims-Paying
$664,163
12.0%
0.83%
Mitigation
$24,899
0.4%
0.06%
Total
$5,536,202
100.0%
0.56%
Primary and Liquidity Combined
$4,847,140
87.6%
0.53%
Primary, Liquidity, and Claims-Paying Combined $5,511,303
99.6%
0.56%
12-Month
Income
Return
0.01%
1.51%
1.57%
0.29%
1.27%
1.23%
1.27%
Effective
Duration
(Years)
0.17
1.63
2.03
0.11
1.44
1.36
1.44
71
CEA INVESTMENT PORTFOLIO
FINANCIAL
HISTORYMARKET
– TOTAL UPDATE
6,000
1.00%
5,000
0.80%
4,000
0.60%
3,000
0.40%
2,000
0.20%
1,000
0.00%
-
12-Month Total Return Rolling Average
Market Value ($MM)
CEA Investment Portfolio History - Total Funds
-0.20%
Market Value ($MM)
12-Month Total Return Rolling Average
72
CEA INVESTMENT PORTFOLIO
FINANCIAL
HISTORYMARKET
– BY FUND
UPDATE
CEA Investment Portfolio History - Liquidity Fund
0.35%
4,000
0.25%
600
0.20%
0.15%
400
0.10%
200
-
Market Value ($MM)
0.80%
3,000
2,500
0.60%
2,000
0.40%
1,500
0.20%
1,000
0.05%
500
0.00%
-
12-Month Total Return Rolling Average
400
0.40%
300
0.20%
0.00%
100
-0.20%
-0.40%
-
Market Value ($MM)
12-Month Total Return Rolling Average
Market Value ($MM)
Market Value ($MM)
0.60%
0.25%
25
12-Month Total Return Rolling Average
0.80%
200
12-Month Total Return Rolling Average
30
1.00%
500
-0.20%
CEA Investment Portfolio History - Mitigation Fund
1.20%
600
0.00%
Market Value ($MM)
CEA Investment Portfolio History - Claims-Paying Fund
700
1.00%
3,500
0.20%
20
0.15%
15
0.10%
10
0.05%
5
-
12-Month Total Return Rolling Average
Market Value ($MM)
0.30%
800
1.20%
12-Month Total Return Rolling Average
4,500
Market Value ($MM)
1,000
CEA Investment Portfolio History - Primary Fund
0.40%
12-Month Total Return Rolling Average
1,200
0.00%
Market Value ($MM)
12-Month Total Return Rolling Average
73
INTEREST
FINANCIAL
RATES
MARKET UPDATE

The economists surveyed by Bloomberg expect short-term interest rates to remain low at least until
the middle of 2015, if not longer, but project increases in the range of approximately 100 basis points
in the 2 and 10-year Treasury rates by the end of the fourth quarter of 2015
Bloomberg Consensus
US Treasury
Current Rate
2 Year
0.47%
Economists Surveyed
10 Year
2.17%
Economists Surveyed
30 Year
2.89%
Economists Surveyed
*Source: Bloomberg as of December 1, 2014.
• The yield curve is steep
as investors are
expecting interest rates
to rise in mid-to-late
2015, or possibly 2016

2014
2016
2015
Q4
Q1
Q2
Q3
Q4
Q1
Change from Current
Rate to 2015 Q4
0.58%
0.80%
1.05%
1.29%
1.57%
1.77%
1.10%
68
66
68
66
67
50
2.56%
2.71%
2.89%
3.08%
3.22%
3.33%
87
84
85
83
83
59
3.24%
3.39%
3.59%
3.74%
3.88%
3.98%
63
62
63
62
62
48
1.05%
0.99%
The yield curve is currently steep as interest rates are expected to increase
Treasury Curves
3.00%
2.56%
2.50%
2.31%
2.00%
1.68%
1.81%
1.85%
2.01%
1.96%
2.07%
1.50%
1.30%
1.00%
0.78%
0.47%
0.50%
0.15%
0.00%
0.88%
0.57%
0.26%
0.30%
1.75
2.00
0.54%
0.46%
0.98%
1.61%
1.43%
1.03%
0.62%
0.14%
1.00
2.50
2.75
3.00
4.00
5.00
Years
Current
1 Year Ago
10-Year Average
74
INVESTMENT
FINANCIALPOLICY
MARKET
SUMMARY
UPDATE

• CEA can take significant
advantage of the yield
curve steepness by
increasing the duration
of the portfolio by 0.75
years to 1.0 year

As interest rates are expected to rise beginning in mid to late 2015, CEA can take advantage of the
yield curve by increasing its portfolio’s duration by 0.75 years to 1.0 year or from 1.75 years to 2.5
years or 2.75 years

The incremental return for increasing duration from 1.75 to 2.5 years is approximately 0.31%,
or $6.2 million in incremental return on an investment of $2 billion, or approximately 50% of
the Primary Fund portfolio

The incremental return for increasing duration from 1.75 to 2.75 years is approximately 0.42%,
or approximately $8.3 million in incremental return on an investment of $2 billion, or
approximately 50% of the Primary Fund portfolio
By increasing the duration of the portfolio but not changing anything else, the CEA would not take on
any additional risk except a marginal increase in duration risk, however, this risk is partially mitigated
as the CEA fund balance has significantly increased since the 1.75 year duration limit was
implemented at its inception

CEA’s total portfolio has grown from approximately $3.8 billion in the July 2009 to $5.5 billion
as of November 2014
75
CONCLUSION
FINANCIAL MARKET UPDATE

Domestic economic sluggishness, regulatory reform, turmoil in the Ukraine, European and Asian
financial crises, and Federal Reserve actions have combined to create a volatile financial market
environment, which have dampened global growth

While the U.S. economy has recovered all jobs lost during the recession, there is a significant portion
of the population that is long-term unemployed and the labor participation rate is historically low

There is a slack in the labor and capital markets and a record low level of labor participation. The
labor prospects for the long-term unemployed decline further the longer they remain unemployed

Interest rates are currently low from a historical perspective and are not expected to move as quickly

Historically low interest rates have led to record setting corporate bond issuance amid strong investor
demand. As there is financial unrest in Europe and Asia, the U.S. is a relatively safer alternative and is
attractive from a yield standpoint relative to other countries

The CEA has benefitted from strong investor demand in the capital markets as seen from the success
of the Ursa Re 2014-1 risk transfer transaction and the pricing of the CEA’s $350 million revenue bond
transaction

With historically low interest rates and a steepening yield curve, CEA can take advantage of the yield
curve by increasing its portfolio’s duration by 0.75 years to 1.0 year and generate approximately $6.2
million in incremental income, or from 1.75 years to 2.75 years and generate approximately $8.3
million in incremental income on an investment of $2 billion, or approximately 50% of the Primary
Fund portfolio
76
DISCLAIMER
The information contained herein is solely intended to facilitate discussion of potentially applicable financing applications and is not intended to be a specific buy/sell recommendation, nor is it an
official confirmation of terms.
The analysis or information presented herein is based upon projections and have limitations. No representation is made that it is accurate or complete or that any results indicated will be achieved.
In no way is past performance indicative of future results. Changes to any prices, levels, or assumptions contained herein may have a material impact on results. Any estimates or assumptions
contained herein represent our best judgment as of the date indicated and are subject to change without notice.
77
Item 8: Communications Programming
C
hief Communications Officer Chris Nance will
update the Board on participating-insurer
engagement in communications programming.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
78
Item 8: Communications Programming
BACKGROUND:
Board-approved budgets support two advertising
programs designed to help sell CEA policies:
• MVP
o Launched in 2011
o Promotes agent-training
o Offers local
advertising support
through direct mail
• CMV
o Launched in 2014
o Offers PIs a percentage of CEA’s online ad budget
o Links co-branded ads with information on how to purchase
a CEA policy on PI websites
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
79
Item 8: Communications Programming
MVP
2011–2014 MVP Summary*
2011
2012
2013
2014
Agents/Producers Trained
3,193
2,295
1,589
1,068
MVP Agents/Producers Registered
3,317
4,144
2,657
2,469
MVP Direct-Mail Delivered (millions)
2.50
2.76
2.98
2.77
*17 of 19 PIs have agents/producers participating in MVP.
CMV
CEA/Earthquake Insurance Information on PI Websites*
Total PIs
Homepage
Product
Homeowner
Renter
Condo
Hazard
CEA
11
0
7
3
1
1
2
EQ Ins
8
0
1
4
2
2
2
*Both CEA and earthquake information appear on 3 of 19 PI websites .
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
80
Item 8: Communications Programming
GOING FORWARD:
MVP
New online portal
• Offers year-round availability of
direct-mail
o English, Spanish, Chinese languages
• Link to a new mobile site to
streamline premium estimates
for agents
• Deliver new content, including
earthquake-insurance-sales tips
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
81
Item 8: Communications Programming
GOING FORWARD:
CMV
• Additional PIs have
expressed potential or
future interest in CMV.
• No additional PIs have
committed to 2015 CMV
participation.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
82
Item 9: Advisory Panel Summary
C
EA Advisory Panel Chair Mark Simmonds will
provide a summary of the proceedings of the
October 23, 2014, Panel meeting.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
83
Item 10: Rate and Form Application
T
he CEA Insurance Operations Department will
present to the Board proposed modifications to the
CEA-earthquake-insurance rating plan and policy forms,
including coverage modifications and enhancements.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
84
Item 10: Rate and Form Application
The CEA’s Strategic Goals
GOAL 1. EDUCATE
Help Californians learn about their seismic risks in
order to prepare for, survive, and recover from
damaging earthquakes.
GOAL 2. MITIGATE
Encourage Californians to take action by strengthening
their homes and securing their belongings in order to
reduce their risk of earthquake damage.
GOAL 3. INSURE
Help Californians understand-and quantify and actively
manage, using CEA insurance products-their risk of
financial loss from damaging earthquakes.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
85
Item 10: Rate and Form Application
The Approval Process
Advisory Panel review. California Insurance Code
section 10089.26 charges CEA Advisory Panel with
approving and submitting condominium earthquakeloss-assessment-coverage rates to the Board. At its
October 23, 2014, meeting, the Panel reviewed staff’s
analysis of condominium earthquake-loss-assessment
rates and voted unanimously to support staff’s
proposed pricing for that coverage.
Insurance Commissioner review. Staff asks Board
support to submit the rate-and-form application to
the Insurance Commissioner for regulatory review
and approval.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
86
Item 10: Rate and Form Application
RECOMMENDATIONS:
CEA staff has analyzed the CEA’s December 31, 2012,
portfolio to prepare a new rate-and-form application
for Board consideration and approval.
The application proposes:
• 8.2% decrease in the CEA’s statewide average rates
• Expanded coverage limits and deductible options
• Enhanced hazard-mitigation premium discount for
qualifying homeowners
• New edition of each of the CEA’s insurance-policy forms, with
coverage enhancements and refinements and new definitions
and policy language
• New, optional endorsements that provide frequently requested
coverage, otherwise excluded
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
87
Item 10: Rate and Form Application
Policyholder Impacts
• Rates are lowered overall, based on statewide average
rates. But the proposed changes may cause individual
policyholders to see their rates increase or decrease,
depending on product, location of insured property,
and related rating factors.
• Based on their current coverage limits:
– Over 40 percent of CEA policyholders will see rates fall by
more than 10 percent, with another 30 percent paying stable
or slightly lower rates.
– Fewer than 20 percent of policyholders can expect an
increase of more than 5 percent.
• All proposed changes are to be implemented for new
and renewal policies effective January 1, 2016, or later.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
88
Item 10: Rate and Form Application
Enhanced Hazard-Reduction Premium Discount
For Homeowners & Homeowners Choice
•
New 10% and 20% mitigation-discount-eligibility rules subject to the
following criteria:
― Pre-1960 frame construction on raised foundation: 20% mitigation discount
― 1960–1978 frame construction on raised foundation: 10% mitigation discount
― IF the policyholder verifies the following:
―
•
o
dwelling anchored to raised foundation (California Building Code (“CBC”)
standards using approved anchor bolts or foundation anchors); AND
o
water heater secured to the building frame (Guidelines for Earthquake Bracing of
Residential Water Heaters (Dept. of General Services, Division of State Architect)).
o
Homes with cripple walls: bracing in accordance with CBC bracing standards.
o
Homes with “post-and-pier” or “post-and-beam” foundations: modified in
accordance with CBC standards.
A signed verification must be submitted to obtain the discount.
The current 5% mitigation discount will remain available for those
policyholders who meet the above criteria and can self-verify.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
89
Item 10: Rate and Form Application
Expanded Coverage, Limit, and Deductible Options
For all products (Homeowners, Homeowners Choice,
Mobilehome, Condominium, and Renters)
• New deductible options. In addition to current 10% and 15%
deductible options, new 5%, 20%, and 25% options.
• New Personal Property limit options. In addition to current
limit options of $5,000, $25,000, $50,000, $75,000, and
$100,000, new $150,000 and $200,000 limit options.
• New Loss of Use limit options: In addition to current limit
options of $1,500, $10,000, $15,000, and $25,000, new
$50,000, $75,000, and $100,000 limit options.
• New “breakage” coverage option: New option to purchase
coverage for breakage of personal property (e.g., items
such as dishes, artwork, and collectibles).
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
90
Item 10: Rate and Form Application
Expanded Coverage, Limit, and Deductible Options
For Homeowners, Homeowners Choice, and Mobilehome
•
New Chimney limit: Current sublimit increases from $5,000
to $10,000.
•
New Building Code Upgrade limit options: Current $20,000 increased-limit
option for Homeowners and Homeowners Choice (only) will be expanded
to include Mobilehome, and a new $30,000-limit option will be offered.
•
New exterior masonry veneer coverage option – for Homeowners and
Homeowners Choice only – New option to purchase coverage for exterior
masonry veneer
•
New Loss Assessment coverage option – New coverage option to
purchase $10,000 sublimit which covers certain assessments imposed by a
Homeowners Association to repair damage caused by an earthquake
•
New Energy Efficient and Environmental Safety Replacement Upgrades
sublimit – New $25,000 sublimit which pays for the increased costs of
replacing damaged covered dwelling property with specified
energy-efficient, renewably-sourced, or environmentally-safe
replacement components
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
91
Item 10: Rate and Form Application
Expanded Coverage, Limit, and Deductible Options
For Condominium Unit Owners
• New Building Property limits: New option to increase the
$25,000 coverage limit to $50,000, $75,000, or $100,000.
• New deductible options for Building Property and Loss
Assessment coverages: In addition to current 15% deductible,
new 5%, 10%, 20%, and 25% options
• New Chimney limit. Current sublimit increases from $5,000
to $10,000.
• New Energy-Efficient and Environmental-Safety Replacement
Upgrades sublimit. New $10,000 sublimit that pays for the
increased costs of replacing damaged, covered dwelling
property with specified energy-efficient, renewably sourced,
or environmentally safe replacement components.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
92
Item 10: Rate and Form Application
Expanded Coverage, Limit, and Deductible Options
For Condominium Unit Owners and Renters
• Personal Property deductible change: Converting
from current $750 personal-property deductible to a
percentage deductible (similar to homeowners) –
new 5%, 10%, 15%, 20%, and 25% deductible options.
― Current policies will be renewed with a 5% deductible,
which will lower some deductibles and increase others,
depending on Personal Property limit selected.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
93
Item 10: Rate and Form Application
Changes or new limitations
For all products (Homeowners, Homeowners Choice,
Mobilehome, Condominium Units Owners, and Renters) :
• New Personal Property sublimits. New sublimit of $3,000
added for:
― Jewelry/Watches/Furs
― Collectibles/Memorabilia
― Beverages contained in glass
• New mold exclusion. Consistent with longstanding
industry practices
• New mold coverage – $5,000 sublimit
― New limited coverage for mold damage to real property resulting
from an earthquake for Homeowners, Mobilehome, and
Condominium policies
• Policy language clarified to promote understanding of
coverage intent
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
94
Item 10: Rate and Form Application
Rate Development
The process for developing the rates similar to the analysis
underlying the current rates.
• Expected losses are developed the EQECAT model
(RQE v. 14) applied to the December 31, 2012, portfolio
and adjusted for expected time rates will be in effect.
• CEA expenses are largely set by statute, regulation,
and contract.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
95
Item 10: Rate and Form Application
Rate Indications
Product
Proposed Rate Change
Homeowners
-9.0%
Mobilehomeowners
-0.7%
Condominium Units
10.5%
Renters
-37.2%
OVERALL
-8.2%
Average indications by segment and overall.
Individual policyholders will vary.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
96
Item 10: Rate and Form Application
Rate Change Drivers
• Overall: Estimated net reinsurance costs are down
16% compared to the estimated net reinsurance
costs for the 2012 filing.
― Overall rate indication would be -2% at 2012 reinsuranceexpense levels.
• Condo/Renters – deductible-structure change
• Condo/Renters – updated value assumptions
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
97
Item 10: Rate and Form Application
Review of policyholder impacts
• More than 40 percent of CEA policyholders will see
their rates fall by more than 10%.
• 30% will pay stable or slightly lower rates.
• Fewer than 20% can expect an increase over 5%.
― Condominium loss assessment
― Pre-1940 houses
• Refer to premium/rate-impact charts (Attachment B)
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
98
Item 10: Rate and Form Application
RECOMMENDED ACTION:
• CEA staff recommends that the Governing Board
support submission of the rate-and-form application
to the Insurance Commissioner for regulatory review
and approval.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
99
Item 11: Mitigation Prestandard (Guidelines) and Research Update
C
hief Mitigation Officer Janiele Maffei will update
the Governing Board on the CEA’s Prestandard
and Mitigation Research Programs.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
100
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Guidelines – Now called Prestandard
(document intended to be adopted into code)
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
101
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Prestandard – ATC 110
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
102
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Roles and Responsibilities
California Earthquake Authority/
Federal Emergency Management Agency
Applied Technology Council (ATC)
ATC Executive Director (Program Executive)
ATC Board of
Directors
ATC Program Manager
ATC Project Manager
Jon A. Heintz
ATC Staff Support
IT, Publication Services,
Meeting Coordination and
Logistics
Task Order
Project Technical Committee
Project Technical Director, Chair
Members (6)
Task Order
Project Steering Committee
Chair
Members (6)
Working Group(s)
TBD
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
103
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Prestandard – ATC 110
Project Technical
Committee
Project Steering
Committee
• Structural engineers
• Geotechnical
engineers
• Contractor
• University researcher
• Research consultant
•
•
•
•
•
California Earthquake Authority
Structural engineers
University researcher
Building official
Industry representative
Contractor
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
104
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Prestandard – ATC 110 Schedule
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
105
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Prestandard – ATC 110 Table of Contents
1.1
1.2
1.3
1.4
1.5
Introduction
General
Requirements
Cripple Walls
and Anchorage
to Foundation
House or Room
over Garage
or Deck
Hillside Dwellings
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
106
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Prestandard – ATC 110 Future Contents
1.6
1.7
Split Level Dwellings
Inadequate Wall BracingOccupied Spaces
1.8 Anchorage of Slab-on-Grade Dwellings
1.9 Parts and Portions of Dwellings
1.10 Recommendations and Priorities
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
107
Item 11: Mitigation Prestandard (Guidelines) and Research Update
RECOMMENDATION:
• That the Board authorize funding and direct the
CEA staff to continue to co-manage the tasks
denominated Priority Level 1 and 2, as described
above, in accordance with recommendations in
the ATC 110 Prestandard Development Plan.
• That the Board approve budgeted CEA
expenditures for 2015, 2016, and 2017, for tasks 1
and 2, at a level of $1 million per year—a total over
three years of $3 million.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
108
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Research Update
Ms. Maffei will update the Governing Board on the
CEA Survey and Research Program planned for
Napa, California.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
109
Item 11: Mitigation Prestandard (Guidelines) and Research Update
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
110
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Typical/expected residential damage from
ground-shaking
Graphic: USGS
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
111
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Chimney damage
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
112
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Cripple-wall failure
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
113
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Cripple wall toppled
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
114
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Cripple-wall damage
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
115
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Cripple wall shifted
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
116
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Severed utility connections
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
117
Item 11: Mitigation Prestandard (Guidelines) and Research Update
House moved away from steps
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
118
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Front door blocked by fallen porch cover
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
119
Item 11: Mitigation Prestandard (Guidelines) and Research Update
Retrofitted house (right) sustained no damage, while nonretrofitted house (left) sustained substantial damage.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
120
Item 12: California Residential Mitigation Program
M
s. Maffei will update the Governing Board on
the CEA’s mitigation programming, including
its participation in the California Residential Mitigation
Program.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
121
Item 12: California Residential Mitigation Program
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
122
Item 12: California Residential Mitigation Program
California Counties + Housing Built 1939 and Earlier +
High Shake Potential
Housing built 1939 and
earlier with high
earthquake-risk layer
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
123
Item 12: California Residential Mitigation Program
EB+B Expansion
 500 to 575 residential retrofits, in six cities
Oakland [100]
Los Angeles [100]
San Francisco [75]
Pasadena [125]
San Leandro [100]
Santa Monica [75]
 12 ZIP Codes in Northern California
 14 ZIP Codes in Southern California
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
124
Item 12: California Residential Mitigation Program
Marketing Outreach
• Community Outreach
o City council meetings
o Neighborhood associations
o Community newsletters
• Direct Mail
o Door hangers
o Postcard
o Brochure
o Email
• Media relations
• Advertising
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
125
Item 12: California Residential Mitigation Program
Marketing Outreach
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
126
Item 12: California Residential Mitigation Program
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
127
Item 13: Proposed California Residential Mitigation 2015 Program Funding
M
r. Richison and Ms. Maffei will request Board
approval to transfer funds for use in the CRMP
incentive program.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
128
Item 13: Proposed California Residential Mitigation 2015 Program Funding
• CRMP board met on December 2, 2014, and approved
program expansion, aiming to complete 750 seismic
retrofits through awarding incentive grants of up to $3,000
per house in the 2015 Earthquake Brace + Bolt program.
• The first expansion phase: (Six cities in 26 ZIP Codes – in
Northern and Southern California, including Napa, site
of moderate but damaging earthquake in August)
appears on target to deliver 500 to 575 retrofits by
September 30, 2015.
• The second expansion phase: Mid-2015, offering 500 to
575 incentive payments to homeowners in additional
cities and ZIP Codes. Participants will complete their
retrofits by February 28, 2016, and CRMP will issue half of
the incentive payments in 2015.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
129
Item 13: Proposed California Residential Mitigation 2015 Program Funding
• The CRMP holds $ 257,678 as of September 30, 2014.
• By agreement with Cal OES, the CEA is still the sole
funder of CRMP.
• In order for CRMP to execute the planned EBB
program for 2015, CRMP will need additional CEA
mitigation funds of $3 million.
RECOMMENDATION:
• Staff recommends the Board approve the proposed
transfer to CRMP from the CEA Mitigation Fund in the
amount of $3 million for the purposes described
above.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
130
Item 14: 2014 CEA IT Project Portfolio Update
C
hief Information Officer Todd Coombes will give a
progress report to the Board on the 2014 CEA IT
Project Portfolio.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
131
Item 14: 2014 CEA IT Project Portfolio Update
Portfolio Progress
•
All statistics are forecasted to reflect portfolio status as of the end of December 2014.
•
Project statuses: 67% complete, 11% cancelled, 14% continuing to 2015, 8% deferred to 2015.
Portfolio Changes
•
Changes indicated are for the entire duration of the portfolio and reflect the dynamic
nature of CEA technology needs across the business.
•
27 initial projects, 9 projects added, 24 projects completed, 4 projects cancelled.
•
Five active 2014 IT Portfolio Projects are continued in the proposed 2015 IT Project Portfolio.
•
Three planned 2014 IT Portfolio Projects will be deferred to proposed 2015 IT Project Portfolio.
Expenditures
•
Projected external expenditures for the 2014 IT Project Portfolio will be 5% under budget.
•
Budget: $1,512,980
•
Projected Actual: $1,429,735
2014 IT Project Portfolio Close-out
•
The 2014 IT Project Portfolio will be closed on December 31, 2014.
•
Each project in the portfolio will be concluded, and no additional expenditures will be
incurred for the 2014 IT Project Portfolio.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
132
Item 14: 2014 CEA IT Project Portfolio Update
Completed Projects
•
Claims Reimbursement – High-volume claim-processing functionality and testing
•
Participating Insurers: Data Separation – Separated related PIs into two system entities
•
User Password Management – Enhance PI password management in EPICenter system
•
CMV – Cooperative Marketing Venture – IT support for CaliforniaRocks.com
•
Premium Calculator – Create reusable web-service version of CEA premium calculator
•
Public Website – IT support for new version of EarthquakeAuthority.com
•
CEA Employee Portal / Internal Website ("Shockwave") – New CEA intranet site
•
Marketing Value Program (MVP) 2014 – Updates to support-system for CEA’s agent-training
•
Concentric Data Warehouse – CEA policy- and claim-data warehouse
•
Convert Legacy Reports to Source from Concentric – Reporting updates
•
EPICenter 2.0 – Miscellaneous enhancements and updates to EPICenter system
•
EPICenter 3.0 – Develop service platform (“Seismic”) and future EPICenter product engine
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
133
Item 14: 2014 CEA IT Project Portfolio Update
Completed Projects (continued)
•
Centralized Policy Processing – Business Case – Information-gathering and RFP development
•
Great Plains (POC) / Upgrade – Upgrade financial system and migrate to hosted platform
•
2013 Internal Audit Closure – Finalize IT internal audit from 2013
•
PolicyTech Implementation – Select and implement system to manage internal policies
•
Disaster Recovery Plan Rewrite – Update DR documentation and test at new data centers
•
Project 1 – EPICenter Maintenance Fixes – High-priority defect corrections in EPICenter
•
PMO / IT Governance Tool (Clarizen) – Software for IT governance
•
Learning Management System – Search for and recommend a new LMS
•
Plan B (Claims Processing) – Support manual claim-processing in EPICenter disaster mode
•
Infrastructure Upgrade – Move CEA-IT infrastructure to enterprise-class data centers
•
CRMP / EBB Hosting Relocation – Migrate websites from third-party host
•
EQ Premiums and Coverages App (Android/iOS) – Develop agent/consumer mobile app
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
134
Item 14: 2014 CEA IT Project Portfolio Update
2014 IT Project Portfolio Value
•
CEA IT infrastructure well positioned for security, reliability, and performance,
going forward.
•
Insurance systems upgraded and tested for high-volume claim scenarios.
•
Web sites improved in design, content, and maintainability.
•
Data-warehouse systems established and providing business intelligence for
Finance, Operations, and Communications.
•
CEA financial systems upgraded for efficiency and reliability.
•
New IT web service platform developed – will be used by all future systems, going
forward, and is essential for the product rate-and-form filing.
•
Systems developed and implemented for enhanced marketing support for PIs,
agents, and policyholders.
•
Internal systems implemented for improved governance, communication, and
business continuity.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
135
Item 15: 2015 CEA IT Initiatives and Project Portfolio
M
r. Coombes will seek Board approval for the 2015
CEA IT Initiatives and Project Portfolio.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
136
Item 15: 2015 CEA IT Initiatives and Project Portfolio
Proposed 2015 IT Project Portfolio
•
17 technology-related initiatives from across the CEA, selected and prioritized by CEA
department managers.
•
CEA Project Management Office (PMO) facilitated the development of the Portfolio
and will manage projects and risks.
•
Majority of IT internal-development capacity will be dedicated to supporting and
maintaining existing CEA systems.
•
Remaining IT internal-development capacity will be available for work on the 2015 IT
Project Portfolio.
•
Additional temporary external contractors will be competitively procured (Boardapproved procurement system) to work on the Portfolio.
•
Estimated temporary external contractor expense is $877,000 (included in the 2015
CEA budget).
•
Governing Board will receive Quarterly Project Portfolio status reports, including a
progress scorecard, expenditures update, change summary, and project-risk report.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
137
Item 15: 2015 CEA IT Initiatives and Project Portfolio
Proposed 2015 IT Project Portfolio
Project Number Project Name
2015-01
2015-02
2015-03
2015-04
2015-05
2015-06
2015-07
2015-08
2015-09
2015-10
2015-11
2015-12
2015-13
2015-14
2015-15
2015-16
2015-17
CEA Function
CEA Policy Review and Implementation in PolicyTech
Compliance Hotline
Enterprise Content Management System (ECMS)
HR Software Implementation
Virtual Desktop Infrastructure (VDI) Implementation
Litigation Management System
Outside Counsel Management System
Develop Agent Interface for Rate Calculator
Customer Relationship Management (CRM) System
Fault Flyover Map Development
Migrate CEA Externally Hosted Websites to Internal
MVP 2015/2016
Social Media Software Implemetation
2016 Rate and Form Change
New Participating Insurer Setup
Zip Code Management Solution
Reinsurance Management System
California Earthquake Authority
Governing Board Meeting
Compliance
Compliance
Compliance
HR
IT
Legal Services
Legal Services
Marketing
Marketing
Marketing
Marketing
Marketing
Marketing
Operations
Operations
Operations
Reinsurance
External Cost
$
$
$
77,980.00
121,380.00
50,960.00
$
$
$
$
$
$
$
$
$
52,920.00
45,500.00
140,000.00
22,580.00
35,000.00
15,260.00
170,240.00
19,600.00
112,000.00
$
$
13,580.00
877,000.00
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
138
Item 15: 2015 CEA IT Initiatives and Project Portfolio
2015 IT Project Portfolio Value
•
Assist in selection and implementation of business software for HR, Legal and
Compliance, Communications, and Finance.
•
Technology support for CEA Compliance to review and update company
policies, establish a Compliance Hotline, and implement automated records
retention and management.
•
Implement Virtual Desktop Interface solution for improved security and
portability of desktop computing across the CEA.
•
Continue to improve CEA websites, with focus on design, content, and internal
support and management.
•
Technology assistance to CEA Marketing for agent-training, sales support, and
GIS mapping.
•
CEA Operations technology support on rate-and-form filing, adding a new
participating insurer, and insurance-system enhancements.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
139
Item 16: Update on IT Infrastructure Upgrade
M
r. Coombes will update the Board on progress on
upgrading CEA IT Infrastructure.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
140
Item 16: Update on IT Infrastructure Upgrade
Data-Center Co-location Services
• On May 15, 2014, CEA issued RFQ #4-14, seeking competitive bids on
co-location data-center facilities for a three-year term.
• RagingWire Data Centers, Inc., was selected.
• CEA contracted with RagingWire for enterprise primary and secondary
data-center co-location services, including access to secured datacenter space and use of shared facility resources such as electrical
power, air conditioning, fire suppression, communications, and support.
Hardware Procurement
• On May 15, 2014, the CEA issued RFP #5-14, seeking competitive bids
for a three-year lease on IT-infrastructure hardware.
• CDW Corporation was selected.
• CEA contracted with CDW for hardware procurement for IT network,
server, data storage, and related purposes, for use at the enterprise
primary and secondary co-location data centers. CEA also signed a
contract with CDW’s lease provider (IBM Corporation) for the threeyear lease of IT hardware, with $0 buy-out at lease-end.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
141
Item 16: Update on IT Infrastructure Upgrade
Implementation
• CEA worked with RagingWire to receive and install IT network, server,
data storage, and related hardware, first at the primary Sacramento
data center and then at the secondary Ashburn, Virginia, data center.
• CEA also worked with its data-communications provider to
establish high-speed data connections between CEA offices and
RagingWire Sacramento, and between RagingWire Sacramento and
RagingWire Ashburn.
• Production, test, and development computing environments were
created and tested in both data centers.
• CEA collaborated with a consulting firm to document and test new
disaster-recovery protocols between the primary and secondary
data centers.
Transition
• Final testing is underway to validate both data-center implementations.
• Transition to the upgraded IT infrastructure and new computing
environments is scheduled to occur in December, pending successful
environment-testing results.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
142
Item 17: Concept for Centralizing CEA Policy-Processing
M
r. Coombes will present to the Board a concept for
centralizing CEA insurance-policy processing.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
143
Item 17: Concept for Centralizing CEA Policy-Processing
Challenges
• Each PI has unique systems and processes for the same CEA
earthquake policy.
• Difficulty implementing CEA policy and rate changes at each PI.
• Keeping CEA’s data in sync with
each respective PI’s data.
• Visibility of information.
• Access to innovation.
• Costs.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
144
Item 17: Concept for Centralizing CEA Policy-Processing
Solution Objectives for Centralized Policy
Processing (CPP)
•
One system for all CEA policies, across PIs.
•
Cost reduction through economies of scale.
•
Minimize impact of CEA policy changes.
•
Standard framework with configurable options.
•
Built-in data synchronization.
•
Information visibility and integration.
•
New technologies and best practices.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
145
Item 17: Concept for Centralizing CEA Policy-Processing
Evaluation of Solution Alternatives
•
Formed CPP Working Group, including participating insurers.
•
Conducted a CPP questionnaire and follow-up phone calls with PIs.
•
Issued software- and service-vendor Request for Information (RFI).
•
Reviewed all feedback and identified three different solution models.
•
Developing Request for Proposal (RFP) for each solution model.
•
Will evaluate RFP responses and make a recommendation.
•
Recommendation in the first quarter of 2015.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
146
Item 18: Request for Qualifications and Proposals
D
irector of Policy, Research & Special Projects
Bruce Patton will present and describe a planned
Request for Qualifications and Proposals for conducting
research to support CEA’s ongoing effort to quantify the
performance effects of bracing cripple walls and
anchoring mud sills.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
147
Item 19: 2015 CEA Business Implementation Plan
M
r. Pomeroy will present the 2015 CEA Business
Implementation Plan for Board consideration
and approval.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
148
Item 19: 2015 CEA Business Implementation Plan
California Earthquake Authority
2015 Business Implementation Plan
Execute Strategic Mission
The California Earthquake Authority is California’s not-for-profit, public
provider of residential earthquake insurance—publicly managed and
privately funded, with programs to encourage and support effective
action to reduce the risk of earthquake damage and loss.
GOAL ONE: Educate. Help Californians learn about their seismic risks in order to
prepare for, survive, and recover from damaging earthquakes.
GOAL TWO: Mitigate. Encourage Californians to take action by strengthening
their homes and securing their belongings in order to reduce their risk of
earthquake damage.
GOAL THREE: Insure. Help Californians understand—and quantify and actively
manage, using CEA insurance products—their risk of financial loss from damaging
earthquakes.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
149
Item 20: 2015 CEA Budgets: Insurance Services
M
r. Pomeroy and Mr. Richison will present the
Proposed 2015 Insurance Services Budget.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
150
Item 20: 2015 CEA Budgets: Insurance Services
2015 Budget
2014 Projected Premium: $608M
• 2014 Budget: $353.3M
• 2014 Projected expenditures: $352.6M
2015 Projected Premium: $616M
• 2015 Proposed Budget: $347M
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
151
Item 20: 2015 CEA Budgets: Insurance Services
2015 CEA Budget: $347M
Risk Transfer: $210.2M
Agent Commissions: $61.7M
Statutory Expenses: $23.9M
PI Admin Fees: $19.1M
Marketing Expenses: $11.2M
Capital Markets: $9.4M
Legal Services: $7M
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
152
Item 20: 2015 CEA Budgets: Insurance Services
2015 Statutory Expenses Compared to
Previous Method
AB: 2064
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
153
Item 20: 2015 CEA Budgets: Insurance Services
2015 Budget: Previous Method
2014 Operating Expense Budget: $15.5M
2014 Projected Operating Expense Expenditures: $13.8M
2015 Proposed Operating Expense Budget: $17.9M
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
154
Item 20: 2015 CEA Budgets: Insurance Services
2014 Budget: Previous Method
2014 Operating Expense Budget: $15.5M
2014 Projected Operating Expense Expenditures: $13.8M
1. Salaries and benefits lower than anticipated
2. Planned office expansion did not happen
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
155
Item 20: 2015 CEA Budgets: Insurance Services
2015 Budget: Previous Method
2014 Projected Operating Expense Expenditures: $13.8M
2015 Proposed Operating Expense Budget: $17.9M
1. Unfilled or partially filled 2014 positions expected
to be filled in 2015
2. Office expansion will take place in 2015
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
156
Item 20: 2015 CEA Budgets: Insurance Services
Statutory Cap: Old and New Methods (for 2015)
2015 Projected Premium: $616M
Old Method:
•
3% of $616M: $18.5M
•
Operating Expenses: $17.9M
New Method:
• 6% of $616M: $37M
• Statutory Expenses: $23.9M
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
157
Item 20: 2015 CEA Budgets: Insurance Services
Attachment A: Budgeted to Actual Expenditures 2014
Insurance Services Budget
(a)
(b)
(c)
(d)
(e)
(f)
(d=a+b+c)
(g)
(h)
(i)
(g=e+f)
(h=d-g)
(i=g/d)
Augmented & Adjusted
Approved Budget (d) vs.
Approved
Salaries & Benefits
2014 Budget after
Actual
Projected
Actual and Projected
Actual & Projected
Percentage used of
2014 Budget
Adjustments
Augmentations
Augmentations
Expenditures
Expenditures
Expenses
Expenses (g)
Augmented & Adjusted
1/1/2014
thru 12/31/2014
thru 12/31/2014
and Adjustments
as of 10/31/14
11/1/2014 to 12/31/2014
at 12/31/14
at 12/31/14
Approved 2014 Budget
1,395,197
88.05%
Rent
753,615
20,000
-
773,615
624,666
146,055
770,721
2,894
99.63%
Travel
405,987
-
-
405,987
263,813
60,940
324,753
81,234
79.99%
2,000
-
-
2,000
-
-
-
2,000
0.00%
Telecommunications
181,140
-
-
181,140
149,664
29,460
179,124
2,016
98.89%
Training
285,719
-
-
285,719
149,593
51,382
200,975
84,744
70.34%
Insurance
167,500
50,000
-
217,500
163,381
53,939
217,320
180
99.92%
35,000
-
-
35,000
10,251
7,827
18,078
16,922
51.65%
1,268,015
(645,000)
-
623,015
254,058
209,988
464,046
158,969
74.48%
Other Administrative Services
34,885
-
-
34,885
25,016
8,059
33,075
-
94.81%
Furniture/Equipment
47,600
-
-
47,600
29,981
17,387
47,368
232
99.51%
689,665
470,000
-
1,159,665
915,004
243,315
1,158,319
1,346
99.88%
50
105,000
-
105,050
3,450
99,890
103,340
1,710
98.37%
15,551,175
$ 11,066,928
1,747,444
88.75%
Non-paid Consultant Travel
Board/Panel Services
Administration & Office
$ 11,679,999
$
-
$
-
$
11,679,999
$
8,478,051
$
1,806,751
$
10,284,802
$
(Printing & Stationery, Postage)
EDP Hardware/Software
Dept of Insurance Examination
Total Operating Expenses
$ 15,551,175
$
-
$
-
$
$
2,734,993
$
13,801,921
$
Consulting Services
Claims
10,000
-
-
10,000
10,000
-
10,000
-
100.00%
150,000
-
-
150,000
-
10,000
10,000
140,000
6.67%
Executive Recruiting
75,000
-
-
75,000
-
-
-
75,000
0.00%
Financial Consulting
260,000
-
-
260,000
113,174
96,826
210,000
50,000
80.77%
Government Relations
190,000
-
-
190,000
94,500
76,500
171,000
19,000
90.00%
Human Resources
395,000
-
-
395,000
82,031
57,969
140,000
255,000
35.44%
Information Systems
145,000
-
-
145,000
23,757
95,000
118,757
26,243
81.90%
Internal Audit
50,000
-
-
50,000
-
10,000
10,000
40,000
20.00%
Investment Compliance
40,000
-
-
40,000
-
2,500
2,500
37,500
6.25%
100,000
-
-
100,000
19,571
80,429
100,000
-
100.00%
53,538
71.82%
696,281
56.62%
Compliance
Public Relations
Other Consulting Services
Total Consulting Services
190,000
$ 1,605,000
California Earthquake Authority
$
-
$
-
190,000
$
1,605,000
20,825
$
363,858
115,637
$
Governing Board Meeting
544,861
136,462
$
908,719
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
158
Item 20: 2015 CEA Budgets: Insurance Services
Attachment A: Budgeted to Actual Expenditures 2014
Insurance Services Budget (continued)
(a)
(b)
(c)
(d)
(e)
(f)
(d=a+b+c)
(g)
(h)
(i)
(g=e+f)
(h=d-g)
(i=g/d)
Augmented & Adjusted
Approved Budget (d) vs.
Approved
2014 Budget after
Actual
Projected
Actual and Projected
Actual & Projected
Percentage used of
Adjustments Augmentations
Augmentations
Expenditures
Expenditures
Expenses
Expenses (g)
Augmented & Adjusted
1/1/2014 thru 12/31/2014 thru 12/31/2014
and Adjustments
as of 10/31/14 11/1/2014 to 12/31/2014
at 12/31/14
at 12/31/14
Approved 2014 Budget
2014 Budget
Contracted Services
Agent Services
70,000
-
-
70,000
43,246
-
43,246
26,754
61.78%
Audit Services
109,000
-
-
109,000
92,500
16,500
109,000
-
100.00%
2,591,005
-
273,466
2,864,471
1,231,014
1,427,792
2,658,806
205,665
92.82%
300,000
-
-
300,000
-
50,000
50,000
250,000
16.67%
Legal Service - Non-Claims
7,355,000
-
-
7,355,000
1,620,182
2,909,805
4,529,987
2,825,013
61.59%
Marketing Services
8,878,000
-
-
8,878,000
2,887,891
5,971,979
8,859,870
18,130
99.80%
Modeling Services
711,000
-
-
711,000
484,750
226,250
711,000
-
100.00%
IT Services1
Legal Services-Claims Counsel
Rating Agencies
197,350
-
-
197,350
197,300
-
197,300
50
99.97%
3,106,214
-
-
3,106,214
2,365,915
500,865
2,866,780
239,434
92.29%
Other Contracted Services
50,000
-
-
50,000
-
3,000
3,000
47,000
6.00%
Total Contracted Services
$ 23,367,569
3,612,046
84.72%
Staffing Services - Support and Admin
Research
$
-
$
273,466
$
23,641,035
$
8,922,798
$
11,106,191
$
20,028,989
$
200,000
-
-
200,000
198,099
-
198,099
1,901
99.05%
Participating Insurer Commissions
56,742,287
-
-
56,742,287
51,118,918
9,720,461
60,839,379
(4,097,092)
107.22%
Participating Insurer Operating Costs
17,533,367
-
-
17,533,367
15,774,342
3,003,622
18,777,964
(1,244,597)
107.10%
Investment Expenses
2,422,156
-
-
2,422,156
1,846,896
575,260
2,422,156
-
100.00%
Financing Expenses2
5,079,788
-
8,350,000
13,429,788
4,734,929
8,694,859
13,429,788
-
100.00%
222,221,550
-
-
222,221,550
164,762,458
57,459,092
222,221,550
-
100.00%
353,346,358
$ 258,789,226
715,982
99.80%
Risk Transfer
Total Expenditures
$ 344,722,892
$
-
$
1Augmentation
due to board approved upgrade in CEA IT infrastructure.
2Augmentation
for 2006 bonds interest expenses and 2014 bonds transaction expenses
California Earthquake Authority
8,623,466
$
$
Governing Board Meeting
93,839,339
$
352,628,565
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
159
Item 20: 2015 CEA Budgets: Insurance Services
Attachment B: Proposed 2015 Budget
2015
Insurance Services
Budget
Statutory Expenses
Human Resources:
Compensation and Benefits
16,670,520
Travel
472,338
Other
1,094,827
Board Meetings
33,000
Administration & Office
1,198,429
EDP Hardware
115,270
EDP Software
1,204,490
Information Technology
1,255,830
Telecommunications
241,714
Rent/Lease
876,749
Compliance
10,000
Government Affairs
298,000
Insurance
189,138
Internal Audit
50,000
Intervener Fees
-
Other
3,000
Regulatory Expenses
150,000
Total Statutory Expenses
California Earthquake Authority
23,863,305
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
160
Item 20: 2015 CEA Budgets: Insurance Services
Attachment B: Proposed 2015 Budget
Non-Statutory Expenses
Audit Services
109,000
Capital Market
9,400,500
Claims
10,000
Loans
-
Grants
-
Investment Services
3,174,856
Legal Services
6,967,920
Loss-Modeling
961,500
Marketing Servies
11,179,355
Producer Compensation
61,684,374
Participating Insurer Operating Costs
19,060,471
Seismic Related Research
100,000
Engineering Related Research
250,000
Risk Transfer
210,213,580
Total Budgeted Expenditures
California Earthquake Authority
346,974,861
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
161
Item 20: 2015 CEA Budgets: Insurance Services
Attachment C: Approved 2014 Budget Compared to
Proposed 2015 Budget
(a)
(b)
Final
Salaries & Benefits
Rent
Travel
Non-paid Consultant Travel
Telecommunications
Training
Insurance
$
Board/Panel Services
Administration & Office
(Printing & Stationery, Postage)
Other Administrative Services
Furniture/Equipment
EDP Hardware/Software
Dept of Insurance Examination
Total Operating Expenses
California Earthquake Authority
$
(d)
(c=b-a)
(d=c/a)
Difference
% Change
1,297,915
25,134
63,851
500
60,574
135,826
21,638
11%
3%
16%
25%
33%
48%
13%
Proposed
2014 Budget
2015 Budget
12/31/2014
2014 Format*
11,679,999
753,615
405,987
2,000
181,140
285,719
167,500
(c)
$
12,977,914
778,749
469,838
2,500
241,714
421,545
189,138
$
35,000
33,000
(2,000)
(6%)
1,268,015
731,006
(537,009)
(42%)
34,885
47,600
689,665
50
4,305
497,400
1,319,760
150,000
(30,580)
449,800
630,095
149,950
(88%)
>100%
91%
>100%
2,265,694
15%
15,551,175
Governing Board Meeting
$
17,816,869
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
162
Item 20: 2015 CEA Budgets: Insurance Services
Attachment C: Approved 2014 Budget Compared to
Proposed 2015 Budget (continued)
(a)
(b)
(c)
(d)
(c=b-a)
(d=c/a)
Final
Proposed
2014 Budget
2015 Budget
12/31/2014
2014 Format*
Difference
% Change
0%
Consulting Services
Actuarial
-
-
-
10,000
10,000
-
0%
150,000
10,000
(140,000)
(93%)
Executive Recruiting
75,000
100,000
25,000
33%
Financial Consulting
260,000
391,000
131,000
50%
Government Relations
190,000
298,000
108,000
57%
Human Resources
395,000
600,000
205,000
52%
Information Systems
145,000
-
(145,000)
(100%)
Internal Audit
50,000
50,000
-
0%
Investment Compliance
40,000
40,000
-
0%
100,000
-
(100,000)
(100%)
Claims
Compliance
Public Relations
Other Consulting Services
190,000
Total Consulting Services
1,605,000
$
-
(190,000)
(100%)
1,499,000
(106,000)
(7%)
>100%
Contracted Services
Agent Services
70,000
197,600
127,600
Audit Services
109,000
109,000
-
0%
2,864,471
2,047,030
(817,441)
(29%)
IT Services
Legal Services-Claims Counsel
300,000
300,000
-
0%
Legal Service - Non-Claims
7,355,000
6,540,000
(815,000)
(11%)
Marketing Services
8,878,000
10,909,255
2,031,255
23%
Modeling Services
711,000
961,500
250,500
35%
Rating Agencies
197,350
203,200
5,850
3%
3,106,214
3,732,606
626,392
20%
Staffing Services - Support and Admin
Other Contracted Services
50,000
Total Contracted Services
23,641,035
-
(50,000)
(100%)
25,000,191
1,359,156
6%
200,000
350,000
150,000
75%
Participating Insurer Commissions
56,742,287
61,684,374
4,942,087
9%
Participating Insurer Operating Costs
17,533,367
19,060,471
1,527,104
9%
2,422,156
2,366,656
(55,500)
(2%)
Research
Investment Expenses
Financing Expenses
*
$
13,429,788
9,197,300
(4,232,488)
(32%)
Risk Transfer
222,221,550
210,000,000
(12,221,550)
(5%)
Total Expenditures
353,346,358
346,974,861
(6,371,497)
(2%)
In this view, 2015 budget numbers are categorized and shown using 2014-CEA-budget format.
California Earthquake Authority
Governing Board Meeting
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
163
Item 20: 2015 CEA Budgets: Insurance Services
2015 CEA Budgets: Insurance Services
RECOMMENDATIONS:
Staff recommends that the Board take the following
actions:
• Approve the proposed 2015 Insurance Services budget; and
• Direct staff to operate the CEA business within the total
approved budget amounts.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
164
Item 21: 2015 CEA Budgets: Mitigation
M
s. Maffei and Mr. Richison will present the
Proposed 2015 Mitigation Budget.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
165
Item 21: 2015 CEA Budgets: Mitigation
Attachment A: Budgeted to Actual Expenditures 2014
Mitigation Budget
(a)
(b)
(c)
(d)
(d=a+b+c)
(e)
(f)
(g)
(g=e+f)
2014 Budget after
Actual
Projected
Actual and Projected
(h)
(h=d-g)
Augmented & Adjusted
(i)
(i=g/d)
Approved Budget (d) vs.
Approved
Salaries & Benefits
Rent
Travel
Non-paid Consultant Travel
Telecommunications
Training
Insurance
Board/Panel Services
Administration & Office
Actual & Projected
Percentage used of
2014 Budget
Adjustments
Augmentations
Augmentations
Expenditures
Expenditures
Expenses
Expenses (g)
Augmented & Adjusted
1/1/2014
thru 12/31/2014
thru 12/31/2014
and Adjustments
as of 10/31/14
11/1/2014 to 12/31/2014
at 12/31/14
at 12/31/14
Approved 2014 Budget
$
$
248,764
2,508
21,241
5,000
3,868
12,375
70,801
61.57%
92.43%
57.52%
0.00%
64.19%
45.91%
0.00%
0.00%
37.12%
611
861
38.90%
0.00%
$
(Software Maint & Support, Printing &
Stationery, Postage)
Furniture/Equipment
EDP Hardware/Software
647,379
33,120
50,000
5,000
10,800
22,880
113,600
$
1,000
-
(1,000)
1,000
-
-
647,379
33,120
50,000
5,000
10,800
22,880
112,600
$
1,000
1,000
317,533
26,271
20,971
5,355
10,005
29,324
$
389
139
81,082
4,341
7,788
1,577
500
12,475
-
Total Operating Expenses
$
883,779
$
-
$
-
$
883,779
$
409,987
$
107,763
Consulting Services
Other Consulting Services
Total Consulting Services
$
100,000
100,000
$
-
$
-
$
100,000
100,000
$
-
$
-
Contracted Services
Legal Services - Non-Claims
Mitigation Projects
Staffing Services - Support and Admin
Other Contracted Services
Total Contracted Services
$
CRMP Contribution
Investment Expenses
Total Expenditures
$
$
398,615
30,612
28,759
6,932
10,505
41,799
$
389
139
$
$
517,750
$
366,029
58.58%
-
$
100,000
100,000
0.00%
0.00%
50,000
850,000
-
-
50,000
850,000
106,264
259,128
365,392
50,000
484,608
0.00%
42.99%
222,436
50,000
1,172,436
-
-
222,436
50,000
1,172,436
75,731
181,995
20,003
279,131
95,734
461,126
126,702
50,000
711,310
43.04%
0.00%
39.33%
$
$
$
$
$
$
$
-
-
-
-
-
-
-
-
0.00%
16,800
-
-
16,800
17,209
4,141
21,350
(4,550)
127.08%
1,172,789
46.03%
2,173,015
$
California Earthquake Authority
-
$
-
$
2,173,015
$
609,191
$
Governing Board Meeting
391,035
$
1,000,226
$
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
166
Item 21: 2015 CEA Budgets: Mitigation
Attachment B: Proposed 2015 Mitigation Budget
2015
Mitigation
Budget
Operating Expenses
Human Resources:
Compensation and Benefits
Travel
Other
Board Meetings
Administration & Office
EDP Hardware
EDP Software
Information Technology
Telecommunications
Rent/Lease
Compliance
Government Affairs
Insurance
Internal Audit
Intervener Fees
Other
Regulatory Expenses
1,219,169
47,500
19,000
69,600
1,500
700
-
Total Operating Expenses
1,357,469
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
167
Item 21: 2015 CEA Budgets: Mitigation
Attachment B: Proposed 2015 Mitigation Budget
Other Expenses
Audit Services
-
Capital Market
-
Claims
-
Loans
-
Grants
-
Investment Services
28,400
Legal Services
50,000
Loss-Modeling
-
Marketing Servies
38,000
Producer Compensation
-
Participating Insurer Operating Costs
-
Seismic Related Research
19,000
Engineering Related Research
1,019,000
Risk Transfer
-
Total Budgeted Expenditures
California Earthquake Authority
2,511,869
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
168
Item 21: 2015 CEA Budgets: Mitigation
Attachment C: Approved 2014 Budget compared to
proposed 2015 Mitigation Budget
(a)
(b)
Final
Proposed
2014 Budget
2015 Budget
12/31/2014
Salaries & Benefits
$
647,379
2014 Format*
$
1,219,169
$
(c)
(d)
(c=b-a)
(d=c/a)
Difference
% Change
571,790
88%
Rent
33,120
700
(32,420)
(98%)
Travel
50,000
45,000
(5,000)
(10%)
5,000
2,500
(2,500)
(50%)
Telecommunications
10,800
1,500
(9,300)
(86%)
Training
22,880
19,000
(3,880)
(17%)
-
-
0%
Non-paid Consultant Travel
Insurance
Administration & Office
(Software Maint & Support, Printing & Stationery, Postage)
Furniture/Equipment
EDP Hardware/Software
Total Operating Expenses
$
-
0%
113,600
69,600
(44,000)
(39%)
1,000
-
(1,000)
(100%)
-
-
-
0%
473,690
54%
(100,000)
(100%)
(100,000)
(100%)
883,779
$
1,357,469
$
Consulting Services
Other Consulting Services
100,000
Total Consulting Services
$
100,000
$
-
$
Contracted Services
Legal Services - Non-Claims
50,000
50,000
-
0%
Mitigation Projects
850,000
1,076,000
226,000
27%
Staffing Services - Support and Admin
222,436
(222,436)
(100%)
(50,000)
(100%)
(46,436)
(4%)
Other Contracted Services
50,000
Total Contracted Services
$
CRMP Contribution
Investment Expenses
Total Expenditures
$
* In this view, 2015 budget numbers are categorized and shown
California Earthquake Authority
1,172,436
$
1,126,000
$
-
-
-
0%
16,800
28,400
-
0%
338,854
16%
2,173,015
$
2,511,869
$
using 2014-CEA-budget format.
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
169
Item 21: 2015 CEA Budgets: Mitigation
2015 CEA Budgets: Mitigation
RECOMMENDATIONS:
Staff recommends that the Board take the following
actions:
• Approve the proposed 2015 Mitigation budget; and
• Direct staff to operate the CEA’s mitigation-related activities
within the total approved budget amounts.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
170
Item 22: Organizational and Staff Performance Metrics
M
r. Pomeroy will update the Board on the
development of organizational and staff
performance metrics for the CEA.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
171
Item 23: 2015 Governing Board meeting calendar
M
r. Pomeroy will present for Board consideration
and approval the 2015 Governing Board meeting
calendar.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
172
Item 23: 2015 Governing Board meeting calendar
All meetings are on a Thursday
and begin at 1:00 p.m.
February 19, 2015
May 21, 2015
August 27, 2015
December 17, 2015
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
173
Item 24: Closed session:
Personnel Matters and Litigation Matters
T
he Board will meet in closed session to discuss
personnel matters and litigation matters, as
permitted by California Government Code section 11126,
subdivisions (a) and (e), respectively.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
174
Item 25: Public Comment
P
ublic comment on items that do not appear on this
agenda and public requests that those matters be
placed on a future agenda.
California Earthquake Authority
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
175
Item 26: Adjournment
T
hank you for attending this meeting of the California
Earthquake Authority Governing Board.
GENERAL INFORMATION:
Marc Keller
(916) 661-5000
Toll free (877) 797-4300
California Earthquake Authority
MEDIA CONTACT:
Chris Nance
Chief Communications Officer
(916) 661-5521
[email protected]
Governing Board Meeting
December 17, 2014
This slide and all its contents are the property of the California Earthquake Authority. Copyright 2014 – all rights reserved.
176