Backpedaling on the Earthquake Fund

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California hasn’t suffered major earthquake damage since 1994 when the Northridge temblor’s $44 billion in damages prompted a statewide insurance crisis, Los Angeles Times reports.


Fears grew of huge losses from inevitable catastrophic earthquakes, and within a year insurers were threatening to stop writing all home insurance, including earthquake policies.


The crisis was averted when the Legislature, the governor and the insurance companies agreed to establish a state-backed earthquake insurance authority to sell residential policies, with insurers agreeing to cover a substantial part of the authority’s losses.


Now, 12 years later, the insurers want to slash the amount of money they would be obligated to pay under the original agreement.


If that happens, members of the California Earthquake Authority offer a potentially glum picture. They fear that the price of already expensive premiums would skyrocket, customers would flee, and the system could collapse.


“If the CEA is not financially viable, there will be a crisis again in California in regards to who provides earthquake insurance,” state Insurance Commissioner Steve Poizner said.


Read the full L.A. Times story

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