California Earthquake Authority To Use New Science in Determining Rates

The California Earthquake Authority (CEA) announced today it will begin using a newly released, uniform scientific method in determining insurance rates and the most accurate prices for consumers.

Partially funded by the CEA, the new Uniform California Earthquake Rupture Forecast (UCERF) model allows for more uniform and accurate determination of seismic hazard throughout California. UCERF is a collaboration by the United States Geological Survey, the California Geological Survey, and the Southern California Earthquake Center and is the first statewide, uniform scientific system to determine the probability of earthquakes.

Previously, the science used in determining CEA earthquake insurance rates differed depending on whether the insured property was located in Northern California or Southern California. This meant, for example, that risks in Los Angeles and San Francisco were analyzed using different techniques.

“Having uniform science available when determining earthquake rates represents real progress,” said CEA CEO Glenn Pomeroy. “It allows us to more accurately price our product for the consumer.”

The full effects of the UCERF model on insurance rates will not be determined until the CEA’s rate review in the summer of 2008.

“To be clear, the actual hazard hasn’t changed. What has changed is our understanding of earthquake risk, and this understanding will be reflected in future insurance rates,” said Pomeroy.

The California Earthquake Authority is one of the largest providers of residential earthquake insurance in the world. By law, CEA rates must be actuarially sound and supported by the best available science.

Source: CEA