A bill that allows the California Earthquake Authority tocollect an assessment from insurers to pay for policyholder claimsafter an earthquake has been signed into law by Governor ArnoldSchwarzenegger.

The California Earthquake Authority (CEA) is a publicly managed,largely privately funded organization that provides catastrophicresidential earthquake insurance to state residents. According tothe legislation, California Senate Bill 430, CEA will be allowed tocollect up to $1.3 billion from participating insurers to payclaims after other specified sources of funds have beendepleted.

The CEA said that current sources of funds to pay claims includethe authority to levy approximately $3.66 billion in assessments onparticipating insurers, but that $2.2 billion of that assessmentauthority expires by law on Dec. 1, 2008. Without the enactment ofSB 430, the CEA's claims-paying capacity would have beensubstantially reduced.

According to a release from CEA, the enactment of SB 430 isexpected to permit the organization to maintain both its currentfinancial strength rating and a financial structure that would havea near-100 percent probability of paying all claims that mightarise from an earthquake or series of earthquakes in any givenyear.

“We are extremely pleased that Senate Bill 430 has beenenacted,” said Tim Richison, CEA interim chief executive officer,in a release. “We would like to thank our governing board, ourparticipating insurers, and the legislature for their support.”

CEA's participating insurers include:

ACA Insurance

Allstate Insurance

Armed Forces Insurance Exchange

Automobile Club of Southern California

California FAIR Plan

California State Automobile Association

Commerce West

Encompass

Farmers Insurance Group

Foremost

Golden Eagle

Homesite/GMAC

Liberty Mutual

Merastar

Mercury

State Farm Insurance

USAA

Workman's Auto

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