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California Earthquake Authority Issues $250 Million in Bonds

By Munichain News Desk
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The California agency tasked with insuring against earthquakes sold $250 million in federally taxable bonds to bolster its claims-paying account.

The California Earthquake Authority’s (CEA) bonds mature in November and yield 5.75%. They received a rating of F1+ from Fitch Ratings.

“The authority’s financial flexibility is much stronger than similarly rated private insurers that cover catastrophe risk,” Fitch analysts wrote. They added that this allows CEA to be rated “a full category above the risk assessment of claims-paying resources.” 

The issuance will temporarily decrease the available capital on CEA’s balance sheet, a move that the authority expects will save it about $17 million.

CEA has more than $20 billion available to pay claims, according to the official statement accompanying the sale of the bonds. That sum will not be affected by the balance sheet maneuvering. 

The California legislature established CEA as a privately financed (and publicly managed) insurer in 1996, two years after the Northridge earthquake killed 57 people and caused tens of billions of dollars in damages. It now issues 66% of the residential earthquake policies sold in the state, according to the bond documents. The bonds are limited obligations of the authority, payable by pledged policyholder premiums.

J.P. Morgan Securities LLC served as lead underwriter on the issuance. Raymond James & Associates, Inc acted as municipal advisor.


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