CEA likely came through 1.1 renewals with 23% cut in coverage

America's largest reinsurance buyer, the California Earthquake Authority (CEA), may have come through the 1.1 reinsurance renewals with a roughly $800 million or 23% reduction in its programme.

The CEA went into 1.1 knowing the bar was high. Company officials had warned in December they would not likely be able to replace their full $3.5 billion programme maturing at 1.1 and could come up short in the April renewal of $1.4 billion as well.

In the latest measure, the total claims paying capacity of the CEA has fallen to $18.6 billion, including a reduction in reinsurance and other risk transfer to $8.2 billion, CEA staffers noted in materials for the January 13 board meeting. Those sums were down from $19.5 billion at end-November, including $9.1 billion in reinsurance and related risk transfer.

“Risk transfer capacity available to CEA is shrinking,” staffers wrote, while “pricing for available fisk transfer capacity is increasing significantly.”

The reduction from end-November to early January had also included a net reduction in outstanding cat bond issuance. In mid-December the group's Bermuda-based reinsurance unit Ursa Re announced $305 million in two tranches of cat bonds dated December 2025. That attempted to replace 2019 issuance that matured December 10, 2022, but fell shy of the $400 million maturing sum.

A strategic plan prepared by staff for addressing its rising claim paying needs notably did not recommend paying at all costs for reinsurance to keep pace. That portion of the claim paying capacity tower is now listed as simply “unavailable.”

Instead, staffers had recommended a mix of near-term revenue bond issuance, possible select rate hikes, member assessments and policy limits that might take $2 billion in claims threats off the top.

The January renewal shortfall was not CEA's first. The CEA was already unable to secure a full renewal of expiring coverages at an October 1 deadline, despite a jump in price, officials had said in December.

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