Study Finds Big Insurance Pullback in State : Consumers: Officials find stiff restrictions and sharp price hikes in wake of Northridge earthquake.

Sixteen months after the Northridge earthquake, insurers representing 93% of the California market have either stopped writing new homeowners insurance entirely or have imposed stiff restrictions on their writings, according to a new study by the state Insurance Department.

A companion survey also released Thursday shows that prices for homeowners insurance have climbed sharply since 1993--a development also attributed to the Jan. 17, 1994, earthquake, which cost insurers an estimated $11.7 billion in claims losses.

It has been widely reported that fear of future earthquake losses has caused major insurers to cut back on their writings in California, but Thursday’s report reflects regulators’ first attempt to measure how much the market has shrunk.

Insurers are pushing the state legislature to repeal the California law requiring companies that sell homeowners insurance to also offer earthquake coverage.

However, Gov. Wilson, Insurance Commissioner Chuck Quackenbush and numerous legislators have said they would support such “de-linkage” only if it is accompanied by some mechanism for making sure that earthquake insurance will still be available to consumers.

Quackenbush--an avowed free-marketeer--Thursday threatened to use his emergency powers to create a statewide earthquake insurance pool with mandatory participation by all property insurers unless the industry, lawmakers and consumer advocates can reach a compromise plan to provide affordable coverage.

“While I firmly believe that government intervention in the market is a last resort, time is running out,” Quackenbush said in a statement.

He plans to unveil a framework for the insurance pool in mid-June if no solution has been reached by then, Quackenbush spokesman Richard Wiebe said Thursday.

The Insurance Department studies show that of 179 companies writing homeowners insurance in California as of May 1, only 31--representing 7% of the market--were writing new policies without restrictions.

Forty-three companies, with 55% of the market, were offering new policies with certain restrictions or limitations, while another 105, with 38% market share, had stopped offering new homeowners policies.

The price survey showed that homeowners insurance was most expensive in the Los Angeles/Orange County region, where a $150,000 policy on a 10-year-old, wood frame home had an average annual premium of $603, up $78 or 15%, from 1993.

The pullback from the market by many insurers has made it much more difficult for consumers to find affordable coverage. Real estate industry groups and other observers fear that insurance availability problems may impede home sales and harm the fragile economic recovery.