AMENDED IN ASSEMBLY APRIL 30, 2026

AMENDED IN ASSEMBLY MARCH 2, 2026

CALIFORNIA LEGISLATURE— 2025–2026 REGULAR SESSION

97

Introduced by Assembly Member Calderon

January 8, 2026

An act to amend Section 10089.13 Sections 10089.13 and 12922.5 of the Insurance Code, relating to insurance.

Vote: majority   Appropriation: no   Fiscal committee: yes   Local program: no

LEGISLATIVE COUNSEL’S DIGEST

Existing law establishes the California Earthquake Authority (CEA), administered under the authority of the Insurance Commissioner, to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance. Existing law requires the CEA to annually report to the Legislature and the commissioner on the CEA’s program operations, including the financial condition of the authority, and to post the report on the CEA’s internet website. Existing law requires copies of a certified report examining the CEA’s financial and program operations and verifying the annual report to be made public.

This bill would additionally require the CEA to provide the annual report to the Senate Committee on Insurance and the Assembly Committee on Insurance. The bill would specify that the certified examination and verification report be posted on the CEA’s internet website.

The people of the State of California do enact as follows:

SECTION 1.

Section 10089.13 of the Insurance Code is amended to read:

10089.13.

(a) One year following its commencement of operations, and annually thereafter by each August 1, the authority shall report to the Legislature and the commissioner on program operations in a format prescribed by the commissioner. The report shall include, but shall not be limited to, the financial condition of the authority, a description of all rates and rating plans approved for use in the authority, an evaluation of the functioning of the authority in light of its stated purpose of making residential property insurance and residential earthquake insurance more available. The report shall also include an analysis of the growth by market share of residential property insurance of participating insurers compared to nonparticipating insurers, any adverse consequences on the various insurance distribution systems resulting from the operation of the authority or alterations in the growth of the residential property insurance market share between participating insurers and nonparticipating insurers, any adverse consequences of the various insurance distribution systems resulting from the operation of the authority or alterations in the growth of homeowners’ insurance market share between participating insurers and nonparticipating insurers, and an analysis of any recommended program changes to permit the authority to better fulfill its stated purpose. In making this determination the board shall be mindful of the competitive nature of the market and how any decision can negatively impact insurers who are currently competing in the marketplace. The report shall be provided to the Senate Committee on Insurance and the Assembly Committee on Insurance in compliance with Section 9795 of the Government Code and posted on the authority’s official internet website.

(b) The annual report shall include full information describing the following matters relating to the authority’s condition and affairs:

(1) The property or assets held by the authority, including the amount of cash on hand and deposited in banks to its credit, the amount of cash in the hands of servicing insurance companies, the amount of any stocks or bonds owned by the authority, specifying the amount, number of shares, and the par and market value of each kind of stock or bond, and all other assets, specifying each.

(2) The liabilities of the authority, including the amount of losses due and unpaid, the amount of claims for losses resisted by the authority and the amount of losses in the process of adjustment or in suspense, including all reported and supposed losses, the amount of revenue bonds or other debt financing issues under Section 10089.29 or Section 10089.50, and all other liabilities.

(3) Income of the authority during the preceding year, specifying premiums received, interest money received, and income from all other sources, specifying the source.

(4) Expenditures of the authority during the preceding year, specifying the amount of losses paid, the amount of expenses paid by category, and the amount of all other payments and expenditures.

(5) The costs and scope of all reinsurance and capital market contracts entered into by the authority under Section 10089.10.

(c) As part of the annual report, the authority shall make a separate, summary report on the financial capacity of the authority to pay claims made against the authority. Copies of this report shall also be made available to the public. The report shall include, but shall not be limited to, the following information, valued as of 30 days prior to the date of the report:

(1) The available capital of the authority.

(2) The liabilities of the authority.

(3) The amount of all assessments previously made and the amount of assessments that may be made in the future under Section 10089.23.

(4) The amount of the reinsurance under contract and actually available to the authority.

(5) The amount of all revenue bonds or other debt financing previously issued or contracted for and the amount of all revenue bonds or other debt financing that may be issued or contracted for in the future under Section 10089.29.

(6) The amount of surcharges previously assessed against policyholders and the amount of surcharges that are currently outstanding against policyholders under Section 10089.29.

(7) The amount of capital committed and actually available by contract from private capital markets that is available to pay claims against the authority.

(8) The amount of all assessments previously made and the amount of all assessments that may be made in the future under Section 10089.30.

(9) The amount of all assessments previously made and the amount of all assessments that may be made in the future under Section 10089.31.

(d) In verification of the matters set forth in the annual report provided for in subdivision (a), the Department of Finance shall approve independent qualified auditors selected by the commissioner to examine the books and accounts relating to all matters concerning the financial and program operations of the authority. The commissioner shall file a certified report of the examination with the President pro Tempore of the Senate, the Speaker of the Assembly, the Chairpersons of the Senate and Assembly Insurance Committees, and the Chairperson of the Senate Committee on Judiciary within 10 days of its receipt. Copies of this report shall also be posted on the authority’s internet website. The expense of examining the books and accounts of the authority shall be paid out of the operating funds of the authority.

(e) The authority shall, within 120 days following a seismic event that results in the payment of claims by the authority, and within one year of a major seismic event that results in the payment of claims by the authority, submit to the President pro Tempore of the Senate, the Speaker of the Assembly, the Chairpersons of the Senate and Assembly Insurance Committees, the Chairperson of the Senate Committee on Judiciary, and the commissioner a concise written report of program operations related to that seismic event. The reports shall include, but not be limited to, progress on payment of claims, claims payments made and anticipated, and the functioning of the authority in response to the seismic event. Copies of this report shall also be made available to the public.

SEC. 2.

Section 12922.5 of the Insurance Code is amended to read:

12922.5.

(a) The commissioner shall convene a working group to identify, assess, and recommend risk transfer market mechanisms that:

(1) Promote investment in natural infrastructure to reduce the risks of climate change related to catastrophic events.

(2) Create incentives for investment in natural infrastructure to reduce risks to communities.

(3) Provide mitigation incentives for private investment in natural lands to lessen exposure and reduce climate risks to public safety, property, utilities, and infrastructure.

(b) To the extent that the working group recommends risk transfer market mechanisms that would be provided by insurance and reinsurance companies, the working group shall recommend mechanisms that:

(1) Are profitable to insurance and reinsurance companies.

(2) If appropriate, apply to communities or regions, rather than individual land parcels.

(c) The policies recommended pursuant to subdivisions (a) and (b) shall include all of the following questions:

(1) What are the California analogies to examples in other countries for creating incentives for investment in natural infrastructure as part of insurance policies that mitigate elemental risks?

(2) Can we use insurance to create incentives for wetland restoration to help defend the coast against storm surge?

(3) Can we create incentives for forests to be managed to reduce the risk of major fires?

(4) Can we reduce the exposure of insurance companies to climate change-related losses through innovative state policies or insurance pricing mechanisms that reward good behavior and charge premiums for actions that increase public safety risks or losses of property or environmental attributes?

(5) Can we develop rating systems based on community risk factors to climate events, and use insurance incentives to make a community more resilient?