Earthquake Authority
* In an Aug. 12 Commentary, Insurance Commissioner Chuck Quackenbush cited as evidence of the fiscal stability of the proposed California Earthquake Authority the fact that reinsurers and private investors support it and “reinsurers and private investors do not put $3.5 billion in enterprises that are too risky.” Rather than prove that the CEA is adequately capitalized, this statement supports one of our main points about the CEA: that the reinsurers and investors are well protected, but consumers instead are placed at high risk.
Investors will be guaranteed repayment of their principal. Also, payment of their projected 21% interest will receive priority over policyholder claims. What investor wouldn’t support that deal? Reinsurers are also favored by lopsided, two-year-long CEA contracts that guarantee them continued, unusually high premium flow even if all reinsurance benefits are exhausted. Consumers, on the other hand, will be subject to high earthquake premiums, reduced coverage, pro-rated claim payouts and assessments in the event of underfunding even if they did not file a claim. This is not insurance.
As your Aug. 2 editorial on the CEA noted, “when an insurance commissioner appears all too willing to get the state involved in a private business like insurance, the red flags go up, and with good reason.” A far more balanced approach is needed than that contained in the CEA bills before the state Senate.
ELIZABETH M. IMHOLZ
Special Projects Advocate
Consumers Union
San Francisco
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