2016 California Code
Insurance Code - INS
DIVISION 2 - CLASSES OF INSURANCE
PART 1 - FIRE AND MARINE INSURANCE
CHAPTER 8.6 - California Earthquake Authority
Section 10089.33.

10089.33. (a) If the average daily balance of the authority s available capital exceeds six billion dollars ($6,000,000,000) for the last 180 days of any calendar year, the board shall relieve all participating insurers of their obligation to pay additional earthquake loss assessments under Section 10089.30, by an aggregate amount equal to the amount of available capital in excess of six billion dollars ($6,000,000,000). Each December 31 thereafter, the board shall further reduce the aggregate assessment authorized under Section 10089.30 by the net increase in available capital in excess of the previous levels of available capital at which a reduction in the aggregate Section 10089.30 assessment was made. No reduction pursuant to this subdivision shall exceed 15 percent of the original aggregate Section 10089.30 assessment in any year of operation of the authority.

(b) Commencing April 1, 2010, and on each April 1 thereafter, but only in years that such relief is authorized by this subdivision, the board shall reduce the combined assessment obligation of all participating insurers under Section 10089.31 by 5 percent of the maximum aggregate Section 10089.31 assessment authorized as of January 1, 2009, as provided in this subdivision. Each year of Section 10089.31 assessment reduction is referred to in this subdivision as an assessment-reduction year. Assessment reductions shall take place as follows:

(1) Unless the authority has made payments and established appropriate reserves for claims and claim expenses, including for losses incurred but not reported, that in the aggregate exceeded five hundred million dollars ($500,000,000) on account of a single earthquake event commencing in 2009, as certified by the authority s consulting actuary and accepted by the board, and the authority s available capital as of January 1, 2010, did not exceed the authority s available capital as of December 1, 2008, then effective April 1, 2010, the maximum aggregate Section 10089.31 assessment shall be reduced by an amount equal to the sum of an amount equal to 5 percent of the initial maximum aggregate Section 10089.31 assessment amount and an amount equal to the retained earnings differential, and 2009 shall be an assessment-reduction year.

(2) Unless the authority has made payments and established appropriate reserves for claims and claim expenses, including for losses incurred but not reported, that in the aggregate exceeded five hundred million dollars ($500,000,000) on account of a single earthquake event commencing in 2010, as certified by the authority s consulting actuary and accepted by the board and the authority s available capital as of January 1, 2011, did not exceed the authority s available capital as of December 1, 2008, then effective April 1, 2011, the maximum aggregate Section 10089.31 assessment shall be reduced by an amount equal to the sum of an amount equal to 5 percent of the initial maximum aggregate Section 10089.31 assessment amount and an amount equal to the retained earnings differential, and 2010 shall be an assessment-reduction year.

(3) Beginning in 2012 and each year thereafter, unless the authority made payments and established appropriate reserves for claims and claim expenses, including for losses incurred but not reported, that in the aggregate exceeded five hundred million dollars ($500,000,000) on account of all earthquake events commencing in the preceding year, as certified by the authority s consulting actuary and accepted by the board and the authority s available capital as of January 1 of that year did not exceed the authority s available capital as of December 1, 2008, then effective April 1 of that year, the maximum aggregate Section 10089.31 assessment shall be reduced by an amount equal to the sum of an amount equal to 5 percent of the initial maximum aggregate Section 10089.31 assessment amount and an amount equal to the retained earnings differential, and the preceding year shall be an assessment-reduction year.

(4) If through operation of this subdivision a year is not deemed an assessment-reduction year, no subsequent year shall be an assessment reduction year unless and until either the authority s available capital as of a subsequent April 1 exceeds the authority s available capital as of December 1, 2008; or the limitation established in paragraph (5), below, occurs.

(5) No more than two annual periods may be deemed not to constitute assessment-reduction years.

(6) Effective on the day after the last day of the 10th assessment-reduction year authorized by the board, the remaining maximum aggregate Section 10089.31 assessment shall be reduced to zero.

(7) As used in this section, retained earnings differential means the positive dollar-amount difference between: (A) the authority s positive one-year retained-earnings growth for the preceding calendar year, minus (B) the authority s capacity growth for the preceding calendar year, both calculated as of December 31. As used in this paragraph, one-year retained-earnings growth means the difference between the authority s cumulative retained earnings at December 31 of the preceding calendar year and the authority s cumulative retained earnings at December 31 of the year before the preceding calendar year, calculated in accordance with generally accepted accounting principles as of the preceding December 31. As used in this paragraph, the term capacity growth is the one-year amount of purchased risk transfer, such as reinsurance, or borrowed risk transfer such as bonds, put in place in the authority s financial structure to account for the authority s aggregate exposure growth over the preceding year ending December 31. The board shall be authorized and entitled, in its sole discretion, to make all final decisions regarding the authority s level of financial strength and security and the authority s choice and use of financing and risk-transfer mechanisms. As used in this paragraph, the term aggregate exposure means the aggregate of the limits of liability under all coverages of all earthquake insurance policies issued by the authority.

(c) In no event shall the board reinstate, in whole or in part, any assessment obligation it has reduced pursuant to this section.

(Amended by Stats. 2007, Ch. 303, first Sec. 8. Effective January 1, 2008. Operative July 1, 2008, by second Sec. 8 of Ch. 303.)