2016 California Code
Insurance Code - INS
DIVISION 2 - CLASSES OF INSURANCE
PART 1 - FIRE AND MARINE INSURANCE
CHAPTER 8.6 - California Earthquake Authority
Section 10089.29.

10089.29. (a) If benefits paid by the authority following an earthquake event exhaust the total of (1) the authority s available capital, (2) the maximum amount of all insurer capital contributions and assessments pursuant to Sections 10089.15 and 10089.23, (3) all reinsurance actually available and under contract to the authority, and (4) all capital committed and actually available by contract to the authority from private capital markets, the Treasurer, as agent for sale of bonds for the authority, may sell investment grade revenue bonds or issue or secure other debt financing of the authority or any combination of the revenue bonds or debt financing in an amount up to one billion dollars ($1,000,000,000), in an amount determined by the board pursuant to Section 10089.32. The Treasurer shall make available the net proceeds of the revenue bonds or debt financing as funding for the authority. These funds shall not be used to replenish the fund. Failure of the authority to obtain such funding for any reason shall not obligate the State of California to provide or arrange replacement funding for the authority. The Treasurer may sell revenue bonds for the purpose of refunding the revenue bonds or other debt financing when authorized to do so by the board, and the surcharge authorized by this section may be used to repay that refunding.

(b) (1) In the event of a revenue bond sale or debt financing arrangement pursuant to this section, the authority shall have the power annually to surcharge all authority policies to secure funds solely to repay the bonded indebtedness or other debt. The net surcharge collected shall not exceed the sum calculated pursuant to paragraph (3) of subdivision (a) of Section 10089.23, and in no event exceed one billion dollars ($1,000,000,000), plus costs of issuance and sale of those revenue bonds or other debt and amounts paid or payable to bond issuers and providers of credit support and letters of credit for and interest on those revenue bonds or other debt. In no event shall the surcharge on any authority policy exceed 20 percent of the annual basic residential earthquake insurance premium in any one year for the policy.

(2) If a policy issued by the authority includes a premium surcharge pursuant to this subdivision, the participating insurer shall provide the insured a notice in a stand-alone document stating that the policyholder may cancel or nonrenew the earthquake policy. The notice shall specify that cancellation or nonrenewal of the earthquake policy will not affect the underlying residential property insurance policy. The statement shall be provided with the premium billing and shall include the following statement in 14-point boldface type:

NOTICE OF SURCHARGE ON CEA EARTHQUAKE INSURANCE POLICY AND RIGHT TO CANCEL

A SURCHARGE HAS BEEN INCLUDED IN THE PREMIUM FOR YOUR CEA EARTHQUAKE INSURANCE POLICY. YOU MAY CHOOSE TO RENEW THIS POLICY AT THE NEW RATE OR YOU MAY CANCEL OR NONRENEW YOUR CEA EARTHQUAKE INSURANCE POLICY. CANCELLATION OR NONRENEWAL OF YOUR CEA POLICY WILL HAVE NO AFFECT ON YOUR HOMEOWNERS OR FIRE INSURANCE POLICY. HOWEVER, IF YOU WANT EARTHQUAKE INSURANCE TO BE PROVIDED BY THE CEA, YOU MUST PAY THE FULL PREMIUM FOR THE CEA POLICY, INCLUDING THE SURCHARGE.

(c) The total amount of indebtedness and policy surcharges authorized under this section shall not exceed the sum calculated pursuant to paragraph (3) of subdivision (a) of Section 10089.23, and in no event exceed one billion dollars ($1,000,000,000) plus costs of issuance and sale of those revenue bonds or other debt and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt, regardless of the frequency or severity of earthquake losses at any and all times subsequent to the creation of the authority. Once the authority has levied policy surcharges in an amount equal to the sum calculated pursuant to paragraph (3) of subdivision (a) of Section 10089.23, and in no event more than one billion dollars ($1,000,000,000) plus costs of issuance and sale of those revenue bonds or other debt and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt, the authority s power to surcharge policies shall cease and the authority shall be prohibited from levying additional surcharges pursuant to this section.

(d) Consistent with the provisions of Section 676, the authority shall cancel the policy of basic residential earthquake insurance if the policyholder fails to pay the earthquake policy surcharge authorized by the authority, and the insurer shall cancel the policy of residential property insurance if the policyholder fails to pay the policy surcharge authorized by the authority.

(Amended by Stats. 1996, Ch. 969, Sec. 2. Effective January 1, 1997.)