The California Earthquake Authority (CEA) is Considering Purchasing Cat Bonds over Reinsurance
July 19, 2016

This year the CEA will buy more reinsurance than in prior years, but the CEA may be casting an eye towards revenue bonds as part of its overall claims-paying resources, believing that a bond program could be more effective than reinsurance.

The CEA was formed as the result of the 1994 Northridge earthquake which caused a flood of insurers to abandon that coverage in California. Not withstanding the availability of this coverage through the CEA, it is estimated that only 10% of property owners avail themselves of this cover. The CEA estimates a savings of more than $3 million a year through bond purchases.