BANKING/FINANCE

While some Californians fretted over predictions that a killer earthquake would strike the state in May, a Costa Mesa firm had enough faith in the scientific rejection of such soothsaying to file an application to open the nation’s first insurance company devoted exclusively to covering losses from earthquakes.

“We wish the company had been in place a month ago,” said Richard V. Rupp, chairman of Earthquake Mutual Insurance. “We’ve got Nostradamus’ predictions hanging on the bulletin board.” Nostradamus was the 16th-Century French physician and astrologer who left a long list of predictions.

While EMIC could have made a bundle from nervous homeowners, it cannot issue insurance until its application is approved by the state Department of Insurance. And that may take three months or more because of a backlog of work at the state agency, Rupp said.

So far, EMIC has lined up $65 million worth of reinsurance with domestic and London-based companies to protect itself from major losses, and is arranging a line of credit with Citibank in New York to handle possible losses from earthquake claims in the first five years of business.

The reinsurance and the financing are necessary as part of the application to show that the company can protect itself and pay off claims in a “worst-case” situation, Rupp said.

He said most of EMIC’s business would come from policies the company would provide through big firms like State Farm or Farmers Insurance and from risk managers handling insurance for large businesses.

Those insurers turning over their policies and risks of losses to EMIC would also help to fund the new company by paying a proportional amount in corporate notes--loans that would be paid back by EMIC.

With the filing of the application, the company was able to start talks with insurers that offer earthquake coverage.