CEA is committed to making earthquake insurance as available, reliable, and affordable as possible. While we work hard to keep rates affordable, state law requires our rates to be actuarially sound.
To ensure we are fulfilling this requirement, we have made a change to our underlying rates, and some changes to our insurance policies.
WHEN DO THESE CHANGES BEGIN?
These changes will go into effect for new and renewal policies issued on or after January 1, 2025.
WHAT WILL CHANGE?
There are two changes and one clarification that will go into effect on or after January 1, 2025.
Changes
- The California Department of Insurance has approved a CEA rate increase of 6.8%.
- The average annual dollar impact will be less than $10 for renters and about $70 for homeowners—but some policyholders may see actual costs higher or lower than the average.
- New and renewal policies that include personal property coverage will include a $500 sub-limit for certain breakable items of personal property at no additional cost.
- This update means that policyholders who choose Personal Property coverage (Coverage C), will now be covered for up to $500 worth of damage to breakable items such as glassware, pottery, crystal, china, ceramics, porcelain, or marble, etc.
Policy Clarification
CEA is making a clarification related to roofing materials. The clarification identifies that:
- Solar shingles have always been, and continue to be, included in the same rating category as slate and tile (aka, heavier roof types). Roof types are a factor when determining a policy premium, as heavier roof types can increase the likelihood of damage to the home during an earthquake.
Notably, solar panels mounted on a roof are not the same as solar shingles. Mounted solar panels on a roof are rated based on the underlying roof material. For example, if solar panels were mounted on a composition roof (which is a lighter roof type), the roof would be rated as a composition roof when determining the policy premium.
If you have any questions about these changes, please Contact Us .
WHAT ELSE SHOULD I KNOW?
- Policyholders insuring an older house may be eligible to receive a discount by retrofitting their home. We encourage people to explore ways to reduce their premium by considering a seismic retrofit of their homes. A discount of up to 25% is available for properly retrofitted homes. A manufactured home (mobilehome) that has an earthquake resistance bracing system qualifies for a discount of 21%. Visit our Premium Discounts page to learn more.
- CEA is a not-for-profit residential earthquake provider. CEA works hard to keep rates affordable. We only adjust rates as needed to remain actuarially sound, using the best available science—as required by state law. Any rate changes must be reviewed and approved by the California Department of Insurance.
- CEA has approximately one million policies and the financial strength necessary to pay all covered claims that would result from a reoccurrence of a historic earthquake. CEA currently has access to existing capital, reinsurance, and other funding sources to pay claims. This means CEA expects to have funding to pay 100% of claims each year for all but the most damaging events. Another way of looking at this is to note that if the Great 1906 San Francisco Earthquake—one of the most significant earthquakes of all time (per USGS)—or the 1994 Northridge earthquake reoccurred today, CEA would be able to cover all policyholder claims.
WHY ARE THESE CHANGES NEEDED?
CEA relies extensively on reinsurance (essentially insurance for insurance companies) and similar risk transfer tools to offer all the policy options available today and to maintain robust claim-paying capacity. However, several worldwide events have combined to increase the cost of risk transfer available to CEA, which must be paid for out of premiums collected for CEA’s insurance policies.
Extreme weather events driven by climate change (including wildfires, hurricanes, and other windstorms), high inflation, the increasing costs of construction, and even the war in Ukraine, combined with CEA’s past exposure growth and the fact that CEA does not receive any state or federal backing (unlike other public natural catastrophe insurance entities), has created stress on CEA’s ability to maintain financial strength while avoiding the need for historically large policyholder rate increases.
In an ongoing effort to promote the best interests of its policyholders, CEA has, over recent years, taken several steps to minimize the need for increasingly steep policyholder rate increases—while maintaining key coverage features focusing on rebuilding the structure of the home with coverage for additional living expenses while that repair work is underway.
However, at this stage—while CEA is facing the increasing costly need to maintain its claim-paying capacity; CEA’s increased risk transfer costs; and rising inflation and rebuilding costs—in order to remain actuarially sound, per state law, CEA must pass on these cost increases directly to our policyholders in the form of a rate increase.
STRENGTHEN YOUR HOME
CEA encourages owners of all vulnerable houses to consider a seismic retrofit to make their homes stronger and more resistant to earthquake damage.
These projects can sometimes be done in a day or two and are usually pretty inexpensive—especially when compared to the costs of rebuilding a home that has been severely damaged in an earthquake.
Tell your CEA policyholders with qualifying older homes that have been properly retrofitted that they may be eligible for a premium discount of up to 25% on their CEA policy premium.
Types of homes with earthquake vulnerabilities include raised foundation houses, post-and-pier houses, hillside houses, houses with living space over a garage and manufactured homes (mobilehomes) that have not been installed with an earthquake resistance bracing system.
- Visit StrengthenYourHouse.com to learn more.