CEA Alternatives

Alternative Options for Earthquake Insurance from insurers other than the CEA or California Earthquake Authority.

Other Earthquake Insurance Options to the California Earthquake Authority

Underwriting considerations for Alternative Quake Vendors

The CEA is a public/private insurer that issues earthquake insurance for many insurers in the state of California. The CEA is the largest insurer of single family personal earthquake insurance dwellings in the state of California. It is not the only option however. Numerous other indendent insurers exist.

To get a quote from these other insurers one must reach out to an agency that has access to them. Many property casualty insurers have no access to standalone earthquake policies, while others may only have access to one additional vendor. There are alternatives to the CEA.

Alternative CEA Insurers for Earthquake Insurance:

In this article we will review some of the major options for purchasing earthquake insurance outside of the biggest insurer, these insurers include: Geovera, Palomar, Continental Indemnity, Harco, Stillwater, QBE, and a new form of earthquake insurance known as parametric earthquake insurance. Just becuase these various independent insurers are not created by the state of California does not mean that they are not great options for most residents of the west coast.

In addition we look forward to new entrants into the West Coast EQ property insurance market.

Geovera:

Geovera offers a standalone California earthquake policy that often incorporates an ‘all inclusive coverage model.’ Based in Fairfield, California Geovera has an AM Best A Financial Strength Rating as of January 2021. Geovera also, recently added a line item coverage form in a manner more similar with the CEA.

We use Geovera Often and under certain circumstance they can have the best premium pricing for the coverages offered.

Geovera AM Best FSR: A

Palomar:

Palomar Specialty is a true standalone EQ vendor offering policies in the state of California. Their AM Best Financial Strength Rating is an A- [as of Jan 2021] and they generally allow a la carte pricing. Palomar is based out of La Jolla, California and is owned by Palomar Holdings, Inc. Palomar has both a standard EQ option and a comprehensive EQ option. Palomar is often marketed through Arrowhead.

Palomar is a favorite of ours in numerous underwriting and pricing situations. Palomar can be a great alternative to the CEA.

Palomar AM Best FSR: A-

Continental Indemnity:

Sold through ICAT, Continental Indemnity is the newer offering through ICAT Insurance. Continental Indemnity carries an A AM Best Rating as of January 2021. They are based in Omaha Nebraska. Continental Indemnity’s earthquake insurance policy has a la cate premium pricing option with standard, comprehensive, and comprehensive forms available.

Continental Indemnity is/was a go to option for us for numerous standalone earthquake insurance situations. Continental Indemnity is one of the great CEA Alternatives. At the present time Continental Indemnity is no longer taking on new earthquake clients.

Continental Indemnity FSR: A

Harco Insurance:

Formerly sold through ICAT, Harco insurance does not seem to be writing standalone consumer earthquake insurance policies moving forward. Based in Raliegh NC, Harco National has an A- Financial Strength Rating with AM Best as of January 2021.

Harco was a great California Earthquake Authority option, when it was available.

Harco Insurance AM Best FSR: A-

Stillwater:

Stillwater is another insurer that offers standalone independent Earthquake policies. Stillwater is based in Jacksonville, Florida as of January 2021, they have an AM Best A- FSR. The insurer is part of the Stillwater Insurance Group.

Stillwater has some unique underwriting requirements in California and can offer solid pricing for numerous consumers.

Stillwater AM Best FSR: A-

QBE:

QBE is another Earthquake Insurance option available to some in California. They are based in Wisconsin and QBE carries an AM Best A rating as of January 2021.

The Q in QBE stands for Queensland, just in case you were wondering, hence ultimately QBE is a Australian firm.

QBE Insurance AM Best FSR: A:

What is an FSR: FSR stands for Financial Strenght Rating. Another article about Earthquake FSRs will pick up here at some point, but basically an FSR is a measurement of an insurers ability to meet and pay claims. An FSR rating is important.

A New Earthquake Insurer to Come:

A new admitted standalone earthquake insurer will be added to ths blog post soon. Stay tuned.

Parametric Insurers:

As of the writing of this article about alternative options to the CEA, a newish form of earthquake protection has emerged call parametric insurance. QuakeCov will review in depth in the future parametric insurance options. This form of Quake Coverage is vastly different than typical Earthquake Property Insurance Policies. However please be aware that a new type of earthquake insurance is out there.

Other Alternative Options to the California Earthquake Authority:

There are other options available from time to time, but the above are the major players. For commercial policies the options are often drastically different. [This post is intended generally for consumer contracts.]

Home Insurers Marketing Earthquake Policies:

This can be confusing. Many home insurers, will market themselves as having an Earthquake Option, which they do. However consumers should be aware that many of these homeowner insurance policies are partnering with a other insurers and in many cases this partner is the CEA. Sometimes it is not.

As an example if Farmers Insurance offers you an Earthquake estimate, the policy is actually [more than likley] written on California Earthquake Insurance paper. This is exceptionally important to understand when comparing earthquake insurance policies because if you were attempting to save money by shopping this policy around you would not save any money moving your CEA policy from Farmers to State Farm. A full list of CEA participating vendors can be found here.

These partner “participating providers” include [but not necesarily limited to:] USAA, Toggle, State Farm, Safeco, Progressive, Nationwide and Nationwide PCS, Mercury, Mapfre, Liberty Mutual, Hyundai, Homesite, Foremost, Farmers, Emcompass, AAA, Commerce West, FAIR, ASI, AFI, Amica, Allstate, and ACA. This list is subject to change. I would not depend on this list, if you are interested in discovering if your insurer is a partner with the CEA -Id call and ask them.

If this is still confusing to you know – know this: Very few insurers want to manage the catastrophic risk of earthquakes themselves. Therefore to comply with a California regulation [Code 10081] that requires home insurers to offer Earthquake Insurance, the Home Insurance companies offer Earthquake Coverage from other carriers. Those other carriers take on this catastrophic risk.

This is about as simple as can be explained.

Will You Save Money with an Alternative to the CEA?

Addressing this general question is not easy. Frankly it depends on your situation. How many Stories, Type, Kind, and Age of Foundation, Exact Location, Coverages, Deductibles, Etc. Some clients can save money and some cannot. However given the fact that estimates are free, why not try? If your estimate from one of these independent vendors saves you money – you can consider the switch, if not, you will know that you are getting a fair deal from the California Earthquake Authority.

The following is a partial list of Earthquake Underwriting Factors:

• Age of Building
• Type of Building/Home and Number of Units
• Number of Stories
• Type and Age of Foundation
• Updates and modifications of the Foundation
• House Build Characteristics
• Proximity to Hillside
• Geospatial information
• Specific Location
• Past of Open Earthquake Claims / Unrepaired Earthquake Damage
• Coverage and Deductible amounts

More than any other property insurance policy, other than flood insurance, the underwriting calculation is done automtically via software, at least in this authors opinion. The exact location of the house plays a signficant role in the pricing and acceptance with the independent earthquake insurers. And the age of the structure/foundation is likley the second biggest consideration.

About the California Earthquake Authority:

Created by the California state legislature in 1995 and 1996, the California Earthquake Authority [or CEA for short] is a privately funded, publicly managed insurer that only insures for the risk of earthquake. The CEA is a not for profit entity. The CEA carrier an A- AM Best Financial Strength Rating

The CEA offers piggy back or mini EQ policies that pair with a given home insurance policy. Only participating insurers work with the CEA. The California Earthquake Authority controls the vast majority of earthquake policies in the state of California.

CEA policy bills, claims, etc are all handled through the underlying home insurer.

California Earthquake Authority AM Best FSR: A-

March 2022 Note, recently Fitch Ratings downgraded the CEA’s rating to an A-.

Confusion Concerning MGAs and Insurers:

One thing to understand when shopping for EQ insurance contracts is that the standalone policies are typically sold through vendors, sometimes known as a Program Managers or Managing General Agents or Partners or even the confusing term of Managing General Underwriters. These ‘partners’ will sometimes have their name on some of the proposal paperwork, but it is the insurer whose paper it resides upon that is the most important since they are the one that will have to pay out the claim.

Often the name of the actual insurance company is not easy to spot on the paperwork while the Partner name might be in large bold letters while the actual insurer might be a just a footnote.

In other words, there are often two different names represented on earthquake insurance quotes: The Program Manager and the Insurer. It is the insurer who will write the check for the claim and hence they are one whose financial strength rating should be of concern.

Although this may appear to the be the same issue with CEA mini policies and home insurers – it is a similar problem but for vastly different reasons.

Alternative Options for Earthquake Insurance:

Many of the best options to save money on earthquake options exists when you shop with an independent EQ insurer. These vendors often offer more dynamic pricing, better coverage options, and a lower premium. There are numerous insurers that are rated A- or better.

CEA Policy Forms Vs Standalone Policy Forms:

Consumers of former CEA policies will not find “most” standalone policy forms different. There is one exception in that is sometimes, Geovera. However with the exception of some Geovera policies the similarities between CEA and Continental Indemnity or CEA vs Palomar is not that significant in terms of how the coverages are all laid out.

Continental Indemnity and Palomar both break out line items of coverage. They both offer standard and comprehensive forms. They both have exceptionally similar deductibles. This will all look very familiar to prior consumers of California Earthquake Authority policies.

The standard earthquake forms is mostly just for Main Structures, Coverage A.

Comprehensive earthquake forms allow for additional coverages for Other Structures, Personal Property, and Additional Living Expense, among other potential coverages. Comprehensive forms are more expensive but provide more coverage.

Are the Standalone Insurers Policies Better than the CEA?

Standalone or Alternative Earthquake Insurance Insurers are not necessarily better or worse, just different. There are situations when a standalone policy from Geovera or the like is indeed a better option and situations where the CEA will be a better coverage form.

For many consumers though the most important consideration, right or wrong, is the yearly premium.

All things being equal, the California Earthquake Authority probably has the simplest underwriting process. [That is the process to get the policy in place.] Some of the standalone vendors are a little stricter. This is what you would typically expect from the open market.

In addition standalone insurers may also not require that the Earthquake Policy coverages exactly match the home insurance policy. This is potentially a big bonus in numerous situations. Especially when considering the lack of extra coverage on EQ policy forms.

In summation, if a consumer gets to pay a lower premium, gets more coverage, and with a lower deductible, why wouldn’t you consider the earthquake insurance switch? In many situations that is exactly what you will get if you switch to an alternate option. More EQ options are usually better.

Earthquake Insurance – You Have other Options:

While the California Earthquake Authority represents a great option for insuring against seismic events, it is certainly not the only game in town. Californians should, annually, consult an independent insurance agency to shop their EQ policy around to see if they could save money or increase their coverages.

*All ratings are from January 2022 and may have changed since this time. Please check AMBest for the latest in Financial Strength Ratings.