1. California Earthquake Authority July 2010 Glenn Pomeroy Chief Executive Officer

2. 99% chance of a major earthquake (M6.7) within the next 30 years. Majority of Californians live within 20 miles of a major fault. 2

3. Largest provider of earthquake insurance in the United States 3 More than 800,000 policies in force Writes 70% of all California residential earthquake insurance policies

4. 4 CEA Governing Board Insurance Commissioner Governor Voting members Non-voting members Senate Rules Chair Treasurer Assembly Speaker

5. Current Financial Structure Claims Paying Capacity 1-in-545 year event 5 Total: $9.8B Reinsurance $3.6B CEA Capital $0.3B $3.1B $2.8B Revenue Bonds Participating Insurer Assessments

6. Only 12% of residents with homeowners insurance have earthquake coverage. coverage. Insured Uninsured 6

7. High-priced premium 7 High-percentage deductible

8. Spent on reinsurance $2.5 billion Capital $2.4 billion *Expenses $1.1 billion Reinsurance claims paid: $250,000 1997-2009: Total policyholder premiums $6 billion Reinsurance Costs $2.5 billion 8 * Major Expense Categories Agent Commissions Debt Financing Participating Insurer Fees CEA Operations

9. Double take up rate over 5 years Enhance financial strength Probability of need to borrow – less than 1% COGA FUTURE Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Post-Event Borrowing Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Post-Event Borrowing $10 Billion $2.64 B $.3 B $3.2 B $3.6 B Total $9.8 B 2010

10. S.886: H.R.2555: H.R.4014: Catastrophe Obligation Guarantee Act Florida: Bill Nelson California: Dianne Feinstein and Barbara Boxer Louisiana: Mary Landrieu Catastrophe Obligation Guarantee Act of 2009 California: Loretta Sanchez, Howard Berman, John Campbell, Lois Capps, Judy Chu, Jim Costa, Susan Davis, Sam Farr, Bob Filner, John Garamendi, Michael Honda, Barbara Lee, Zoe Lofgren, Jerry McNerney, Grace Napolitano, Laura Richardson, Lucille Roybal-Allard, Linda Sanchez, Adam Schiff, Brad Sherman, Jackie Speier, Fortney Stark, Mike Thompson, and Lynn Woolsey Louisiana: Charlie Melancon Homeowners’ Defense Act of 2009 Ron Klein (FL) and others - National Catastrophe Risk Consortium - COGA (Title II) - Federal reinsurance - Mitigation 10