PRIOR APPROVAL RATE APPLICATION

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Date:

Your File #:

SERFF

Does this filing include a variance request?

Date Filed:

Compliance Date:

Does this file contain group data? Date Public Notified:

Note: Complete page 2 if this is a group filing Deemer Date:

Is this a specialty filing?

Latest applicable CDI file number in this line, subline and/or program:

Yes No

Rate

Form

Toll Free Phone No.: Line Type

Authorized Signature Date of Filing Telephone Number Mailing Address 801 K Street, Suite 1000, Sacramento, CA 95814

I declare under penalty of perjury under the laws of the State of California, that the information filed is true, complete, and correct.

(916) 661-5513 Is this a variance request submitted after the prior approval application to which

it applies?

Other Residential

Subline Program

NAIC Company Code 10779

Line of Insurance:

Email Address [email protected]

Home Office 801 K Street, Suite 1000, Sacramento, CA 95814

Name and Title of Contact Person Shawna Ackerman, Chief Actuary

(877) 797-4300 Fax No.:(916) 327-8270

Variance % Change New Program Rule

Organized under the Laws of the State of California

NAIC Group Code N/A

Group Name N/A 11-2233

Group Filing: Company Name California Earthquake Authority

X-Reference No.: If yes, provide the applicable CDI File Number:

Intake Analyst: Bureau & Senior: SERFF No.: ( 15 Characters Maximum)

CD (plus 1 paper copy) Paper (1 original plus 1 copy) Filing No.:

CEA2014 DEPARTMENT USE ONLY

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STATE OF CALIFORNIA Company Name: California Earthquake Authority DEPARTMENT OF INSURANCE (CDI) Line of Insurance: EARTHQUAKE

10/17/2014

PROPERTY AND LIABILITY FILING SUBMISSION DATA SHEET

The purpose of this filing is as follows: (More than one may be marked )

TYPE OF FILING PRIOR APPROVAL RATE APPLICATION

PAGES and EXHIBITS REQUIRED

Rates ( Including adoption of advisory organization loss costs. )

Increase rates Pages 1 through 10, 13 & 14, plus exhibits Decrease rate Pages 1 through 10, 13 & 14, plus exhibits Zero Overall rate impact Pages 1 through 10, 13 & 14, plus exhibits

Variance

Page 11 and exhibit 13

Filed after the prior approval application to which it applies. Pages 1 through 6, 11, plus exhibit 13

Coverage Forms ( Including adoption of advisory organization forms. )

With rate impact Pages 1 through 10, 12a, 13 & 14 plus exhibits Without rate impact Pages 1 through 5, 12a

Rules ( Including adoption of advisory organization rules. ) With rate impact

Without rate impact Pages 1 through 5, 12b, Exhibit 20

Edition Date:

Filed together with the prior approval application to which it applies.

All Private Passenger Automobile class plans must be filed separately from the Prior Approval Rate Applications.

Pages 1 through 7, 10, 12, 13 & 14, plus exhibit 17

New Program ( Including adoption of advisory organization loss costs, forms and rules.)

Pages 1 through 10, 12b, 13 & 14 plus exhibits (including exhibit 20)

Prior Approval Rate Application

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STATE OF CALIFORNIA Company Name: DEPARTMENT OF INSURANCE (CDI) Line of Insurance:

Proposed Earned Premium Per Exposure: Proposed Overall Rate Change

INDICATED PROPOSED CHANGE (%) CHANGE (%) 1. -8.3% -8.2% 2. 3. 4. 5. 6. 7. 8. 9. 10. TOTAL: -8.3% -8.2%

PROPERTY AND LIABILITY FILING SUBMISSION DATA SHEET (Continued)

1.83 $

-8.2%

ADJUSTED PROJECTED

COVERAGE* EARNED PREMIUM* EARNED PREMIUM

* Adjusted earned premium is the historical earned premium for the most recent year adjusted to the current rate level and trended to the average date of loss of the proposed rating period.

Total earned premium must include all income derived from miscellaneous fees and other charges.

* Commercial Auto Liability and Physical damage must be combined in one application, with separate rate templates for liability and physical damage.

646,462,010

593,588,389

Edition Date: 10/17/2014

California Earthquake Authority EARTHQUAKE

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STATE OF CALIFORNIA Company Name: California Earthquake Authority DEPARTMENT OF INSURANCE (CDI) Line of Insurance: EARTHQUAKE

10/17/2014

Reconciliation of Direct Earned Premium, Page 8

Miscellaneous Fees and Other Charges, Page 10 Variance Request, Page 11

Excluded Expenses, Page 13

Projected Yield and Federal Income Tax Rate on Investment Income, Page 14

Forms (Attach all independent forms and list all advisory organization forms ) Ratemaking Data and Template (s), Page 7

Additional Data Required by Statute, Page 9

Forms and Rules, Page 12

( Applies only to Medical Malpractice with facultative reinsurance attachment points above one million dollars and Earthquake, where the cost of reinsurance is included in the rate development.)

Filing Memorandum

See the prior approval rate filing instructions regarding the following attachments.

Printed Rate and Rule Manual Pages Property and Liability Filing Submission

Underwriting Rules

Supporting Data Exhibits, Page 6 Filing Checklist, Page 5

Copies of Reinsurance Agreements Data Sheet, Page 4

Group Filing, Page 2

Property and Liability Filing Submission Data Sheet, Page 3

Edition Date:

FILING CHECKLIST

Use this checklist to assemble a complete application Prior Approval Rate Application, Page 1

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STATE OF CALIFORNIA Company Name: California Earthquake Authority

DEPARTMENT OF INSURANCE (CDI) Line of Insurance: EARTHQUAKE

( DCCE ) Development Factors

Exhibit 20: Exhibit 21:

Exhibit 17: New Program

Rules

Super Group Corporate Structure Verification (PPA only) Exhibit 18: Group Filing

Exhibit 19:

Exhibit 14: Insurer's Ratemaking Calculations Exhibit 15: Rate Distribution

Exhibit 16: Rate Classification Relativities Exhibit 11: Ancillary Income

Exhibit 12: Reinsurance Premium and Recoverables Exhibit 13: Variance

Exhibit 8: Loss and DCCE Trend Exhibit 9: Catastrophe Adjustment Exhibit 10: Credibility Adjustment Exhibit 5: Premium Trend Factor Exhibit 6: Miscellaneous Fees and

Other Charges

Exhibit 7: Loss and Defense & Cost Containment Expense Exhibit 2: Rate Level History

Exhibit 3: Policy Term Distribution Exhibit 4: Premium Adjustment Factor

Edition Date: 11/18/2013

SUPPORTING DATA EXHIBITS

Use this document to assemble a complete application Exhibit 1: Filing History

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RATEMAKING DATA

(Click + to expand for more than 3 years; - to contract)

Completed by S. Ackerman Date Completed 11/24/2014 Company/Group Line Description Coverage

%Captive %Direct %Independent (Must add up to 100%)

Marketing System: 100.00%

Prior Effective Date (current rates) 1/1/2012

Proposed Effective Date (new rates) 1/1/2016

CDI File Number (Department use only )0

Does the data provided below reflect a Request for Variance? Variance #:

Data below is:

2nd Prior Year 1st Prior Year

Most Recent Year

Projected*/ New Program**

2011 2012 2013

1 California Direct Written Premium 593,588,389 Exhibit 15, Col. (5). Total Projected Premium 2 California Direct Earned Premium 593,588,389 Exhibit 15, Col. (5). Total

Projected Premium 3 Premium Adjustment Factor (Developed in Exhibit 4)

4 Premium Trend Factor * (Developed in Exhibit 5) 0.00% Trend for the period the rates will be in effect is included above 5 Miscellaneous Fees and Flat Charges (Not included in Line 2;

Developed in Exhibit 6)

431,007

Exhibit 6, 2013 ratio applied to line 1

6 Earned Exposure Units 324,483,667

7 Historic Losses (Projected for New Programs) 270,315,730

Exhibit 14-3, line 1 8 Historic Defense and Cost Containment Expense (DCCE) 25,679,994

Exhibit 14-3, line 2 + line 3 9 Loss Development Factor (Developed in Exhibit 7)

10 DCCE Development Factor (Developed in Exhibit 7)

11 Loss Trend Factor* (Developed in Exhibit 8) 0.00%

Trend is included in line 7

12 DCCE Trend Factor* (Developed in Exhibit 8) 0.00%

Trend is included in line 7 13 Catastrophe Adjustment Factor (Developed in Exh 9)

14 Credibility Factor for Losses & DCCE (Developed in Exhibit 10)

15 Excluded Expense Factor (From Page 13) 0.09%

16 Ancillary Income (Developed in Exhibit 11)

17 Projected Federal Income Tax Rate on Investment Income (From

Page 14)

34.92%

18 Projected Yield (From Page 14) 1.31%

Complete 19, 20 & 21 For Earthquake and certain Medical Malpractice with Reinsurance Only (see instructions)

19 Direct Commissions 10.00%

20 Reinsurance Premium (Developed in Exhibit 12) 234,610,951

Exhibit 12, line 2 + line 4 21 Reinsurance Recoverables (Developed in Exhibit 12) 65,596,620

Exhibit 12, line 3

Variance Change to Leverage on the basis that the insurer either writes at least 90% of its direct earned premium in one line or writes at least 90% of its direct earned premium in California. (Must be accompanied by Variance Request, subject to CDI approval)

Variance Change to Efficiency Standard (Must be accompanied by Variance Request, subject to CDI approval)

* For all trend factors, the Projected Column should reflect the _{annual trend expressed as a percentage.} **_{For New Programs, please see Rate Filing Instructions, Page 4.}

EARTHQUAKE

California Earthquake Authority

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2nd 1st Most

Prior Prior Recent

Year Year Year

2011 2012 2013 1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

STATUTORY PAGE 14 CALENDAR YEAR DATA

RECONCILIATION OF DIRECT EARNED PREMIUM DATA PER PROGRAM

11-2233 Program Residential Eathquake $ 605,793,843 $ 588,502,379 Most Recent CDI File # 568,729,298 $ -$ $ - $ -$ $ - $ -$ $ - $ -$ $ - $ -$ $ - $ -$ $ - $ -605,793,843 $ $ 588,502,379 $ 568,729,298 -$ $ - $ -568,729,298 $ Difference $ - $ - $ -Page 14 $ 605,793,843 $ 588,502,379

For residual market data, a filing number is not required.

Explain the Differences:

This exhibit requires insurers to itemize each program until all data is reconciled to the corresponding annual statement line of insurance ( Statutory Page 14 ).

Statutory TOTAL

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STATE OF CALIFORNIA

DEPARTMENT OF INSURANCE (CDI)

Year 2013

1. Number of claims outstanding at beginning of year 2

2. 168

3. 165

4. Number of claims outstanding at year's end ( (1) + (2) - (3) ) 5

5. 288,464,329

6. 225,000

7. Net loss reserves for outstanding claims excluding claims incurred but not reported 36,250

8.

-9. Losses incurred as a percentage of premiums earned - including IBNR 0.1% 10. Net investment gain or loss and other income or gain or loss allocated to the line. 11,954,169 11. Net income before federal and foreign income taxes ( line 10 plus line 15 ) 243,921,432 12. Total number of policies in force on the last day of the reporting period 841,836 13.

14. Total number of policies non-renewed

15. 231,967,263

( =CY earned premiums minus CY incurred loss minus CY incurred expense ) 16. 62,213,776 20,028,021 27,647,279 13,757,939 123,904 f) other expenses

*CIC 1857.7, CIC 1857.9 and CIC 1864 b) other acquisition costs, c) general office expenses, d) taxes, licenses and fees,

e) loss adjustment expense ( DCCE & AOE ), and Dollar amount of claims paid

Net loss reserves for claims incurred but not reported

Total number of policies cancelled

Net underwriting gain or loss

Separate allocations of expenses for: a) commissions and brokerage expense, ADDITIONAL DATA REQUIRED BY STATUTE*

Calendar Year DATA

Number of claims during the year Number of claims closed during the year

Unearned Premiums

Edition Date: 10/17/2014

Company Name: California Earthquake Authority Line of Insurance: EARTHQUAKE

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STATE OF CALIFORNIA Company Name: DEPARTMENT OF INSURANCE (CDI) Line of Insurance:

INDIVIDUAL POLICY CHARGES

New Business Renewals

Policy fee

Installment fee $ 1.00 $ 1.00

Installment finance charges ( ancillary income ) APR

Endorsement fee Inspection fee Cancellation fee Reinstatement fee Late fee SR 22

Non-sufficient funds ( NSF ) fee ( ancillary income ) Membership dues ( ancillary income )

Other, specify:

Except for installment finance charges, NSF fees, and membership dues, data relating to fees must be included in the ratemaking data, Page 7, Line 2 ( direct earned premium) or Line 5 ( miscellaneous fees ) and Exhibit 6, miscellaneous fees, must be completed. Refer to the instructions for additional information.

Do any fees or installment finance charges apply to this program?

If yes, identify the fee and the amount charged for each type of fee and for each transaction. MISCELLANEOUS FEES AND OTHER CHARGES

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STATE OF CALIFORNIA Company Name:

DEPARTMENT OF INSURANCE (CDI) Line of Insurance:

Restricts Broadens Rate

Coverage Coverage Impact % Flat FORM NO. TITLE TYPE SOURCE CATEGORY [ Yes/ No ] [ Yes/ No ] [ Yes / No ] Change Rate 1] New: BEQ-3B (xx/20xx) Basic Earthquake Policy - Homeowners 3 3 3 No Yes Yes See Exhibit 15 Old: BEQ-3B (01/2012) Basic Earthquake Policy - Homeowners 3 3 3

2] New: BEQ-3C (xx/20xx) Basic Earthquake Policy - Homeowners Choice 3 3 3 No Yes Yes See Exhibit 15 Old: BEQ-3C (07/2012) Basic Earthquake Policy - Homeowners Choice 3 3 3

3] New: BEQ-4A (xx/20xx) Basic Earthquake Policy - Renters 3 3 3 No Yes Yes See Exhibit 15 Old: BEQ-4A (01/2012) Basic Earthquake Policy - Renters 3 3 3

4] New: BEQ-6A (xx/20xx) Basic Earthquake Policy - Common Interest Development 3 3 3 No Yes Yes See Exhibit 15 Old: BEQ-6A (01/2012) Basic Earthquake Policy - Common Interest Development 3 3 3

5] New: CEA03A (XX/2016)

Endorsement - Coverage for Exterior Masonry Veneer (Homeowners, Homeowners

Choice) 2 3 2 No Yes Yes 10.0%

Old: N/A

6] New: CEA04A (XX/2016)

Endorsement - Coverage for Breakables (Homeowners, Homeowners Choice,

Renters and Common Interest Development) 2 3 2 No Yes Yes 60.0% Old: N/A

9] New: CEADRV (xx/20xx) CEA Earthquake Insurance Dwelling Retrofit Verification Form 4 3 2 No No No Old: N/A

9] New: CEA02S (XX/2016) California Earthquake Authority Availability of Hazard-Reduction Premium Discount 4 3 3 No No No

Old: CEA02 (01/2012) California Earthquake Authority Availability of Hazard-Reduction Premium Discount 4 3 3

9] New:

CEA Choice Notice

(XX/2016) Important Notice 4 3 3

Old:

CEA Choice Notice -

Ed.007/2012 Important Notice 4 3 3

TYPE: SOURCE CATEGORY

1) Application 1) ISO* 1) New, mandatory

2) Endorsement 2) Other Advisory Organization* 2) New, optional

3) Policy 3) Company 3) Replacement, mandatory

4) Other ( Please define ) 4) Other (describe) 4) Replacement, optional 5) Withdrawn, mandatory 6) Withdrawn, optional

Additional Information and Documents Required

Edition Date: 11/18/2013

FORMS

Insurers who wish to use a new or replacement form in connection with a new or existing program must furnish the following information and documentation for our review.

For NEW FORMS, furnish a copy of the form to be filed, unless identical to an advisory organization form. If the form is a new endorsement to the policy, describe any changes in coverage under the policy. Describe what adjustments, if any, will be made to the premium due to the introduction of the forms.

For REVISED FORMS, describe any changes in coverages between the proposed form and the current form. Reference pertinent sections of each form affected. Brackets [ ] should be used to identify any deletions on the current form and underline all changes in the revised form. Describe what adjustments, if any, will be made to the premium due to the revisions.

Revisions must be highlighted and the corresponding manual pages must be provided.

SOURCE FORM NO *

* Provide California Dept. of Insurance number ( CDI# ) under the column identified as Source Form No.

Describe the purpose of the form or form change

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PROJECTED YIELD AND FEDERAL INCOME TAX RATE ON INVESTMENT INCOME

Assets

Over 1 yr Over 5 yrs Over 10 yrs

Line number One year or less through 5 yrs through 10 yrs through 20 yrs Over 20 yrs 1.7 US governments 1,763,206,531 2,731,162,320

2.7 All other governments 0 0

3.7

States, territories and

possessions 0 0

4.7 Political subdivisions 0 0

5.7

Special revenue and

assessment obligations 434,160,150 0

6.7 Public utilities unaffiliated 61,860,810 0 7.7

Industrial and

miscellaneous 0 0

8.7 Credit tenant loans 0 0

9.7

Parent, subsidiaries and

affiliates 0 0

One year or less

(1)

US government bonds Sum

of line 1.7 and 2.7 1,763,206,531 2,731,162,320 0

(2)

Other taxable bonds Sum of line 6.7, 7.7, 8.7,

9.7 and half of 5.7 278,940,885 0 0

(3)

Tax exempt bonds Sum of line 3.7, 4.7, and

half of 5.7 217,080,075 0 0

Data on line 1.7 through 9.7 are from the insurer group's most recent consolidated statutory annual statement, schedule D, part 1A, section 1.

Page 14a

Edition Date: 10/17/2014

Over 1 year through 10 years Over 10 years

Short Term Intermediate Long Term

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Currently Federal

Invested Available Return On Income Federal Income

Assets Yield * Invested Assets Tax Rate Taxes

[1] [2] [3]=[1]*[2] [4] [5]=[3]*[4]

(1) US government bonds

(A) Short 1,763,206,531 0.02% 411,415 35.00% 143,995

(B) Intermediate 2,731,162,320 2.42% 66,003,089 35.00% 23,101,081

(C) Long 0 2.91% 0 35.00% 0

(2) Other taxable bonds

(A) Short 278,940,885 0.12% 344,027 35.00% 120,409

(B) Intermediate 0 3.29% 0 35.00% 0

(C) Long 0 4.32% 0 35.00% 0

(3) Tax exempt bonds

(A) Short 217,080,075 0.08% 174,026 5.25% 9,136 (B) Intermediate 0 2.09% 0 5.25% 0 (C) Long 0 3.53% 0 5.25% 0 (4) Common Stock 0 (A) Dividends 0 14.18% 0 (B) Capital gains 0 34.10% 0 (5) Preferred stock 0 dividends 0 14.18% 0 (6) Mortgage loans 0 0 35.00% 0 (7) Real estate 0 0 35.00% 0 (8) Cash** 2,801,378 0.02% 654 35.00% 229 (9) Other*** 0 (A) Dividends 0 14.18% 0 (B) Capital gains 0 34.10% 0 (10) Total

Sum of line (1) thru (9) 4,993,191,189 66,933,211 23,374,851

Data in column [1], line 4 through (9), are from the insurer group's most recent consolidated statutory annual statement page 2 - Assets. * Currently available yields are defined in CCR §2644.20. Latest values are posted at

http://www.insurance.ca.gov/0250-insurers/0800-rate-filings/0200-prior-approval-factors/

** Annual statement page 2, line 5, cash only. Cash equivalents and short-term investments are included in Schedule D. *** Annual statement page 2, line 6, 8, 9, and 11.

Page 14b

Prior Approval Rate Application (Yield Tax Worksheet)

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Currently Federal

Invested Available Return On Income Federal Income

Assets Yield Invested Assets Tax Rate Taxes

[1] [2] [3]=[1]*[2] [4] [5]=[3]*[4]

(10) Total 4,993,191,189 66,933,211 23,374,851

line (10)

exhibit 13, page 2

(11) Investment expense 2,197,826 35.00% 769,239

Annual Statement (AS) page 11, line 25

(12) Total 4,993,191,189 64,735,385 22,605,612

after investment expense line (10) - line (11) (13) Federal income tax rate

line (12) column [5] / column [3] 34.92% (14) Projected yield 1.30% on invested assets line (12) column [3] / column [1]

Most Recent Year

(15) Loss reserves 36,250 AS page 3, line 1 (16) Loss adjustment 3,263 expense reserves AS page 3, line 3 (17) Unearned premium 288,464,329 reserves AS page 3, line 9 (18) Surplus as regards 4,665,530,384 to policyholders AS page 3, line 37

(19) Total reserves and 4,954,034,226 surplus

Sum of line (15) to (18) (20) Projected yield

adjusted to reserve and surplus base

line (14) * line (12) / line (19) 1.31%

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RATE TEMPLATE

Edition Date: 10/17/2014

CDI FILE NUMBER: 0

COMPANY/GROUP: California Earthquake Authority

LINE OF INSURANCE: EARTHQUAKE

COVERAGE: 0

PRIOR_EFF_DATE: 1/1/2012 Completed by: S. Ackerman

PROPOSED_EFF_DATE: 1/1/2016 Date: 11/24/2014

DATA PROVIDED BY FILER

Year: 2011 2012 2013

PRIOR2 PRIOR1 RECENT

PROJECTED/ SUMMARY WRT_PREM 0 0 0 593,588,389 ERN_PREM 0 0 0 593,588,389 PREM_ADJ 1.000 1.000 1.000 PREM_TREND 1.000 1.000 1.000 0.000

MISCELLANEOUS_FEES (& other flat charges) 0 0 0 431,007

EARNED_EXP 0 0 0 324,483,667 LOSSES 0 0 0 270,315,730 DCCE 0 0 0 25,679,994 LOSS_DEV 1.000 1.000 1.000 DCCE_DEV 1.000 1.000 1.000 LOSS_TREND 1.000 1.000 1.000 0.000 DCCE_TREND 1.000 1.000 1.000 0.000 CAT_ADJ 1.000 1.000 1.000 CREDIBILITY 100.00%

EXPENSE EXCLUSION FACTOR 0.09%

ANC_INC 0 0 0 0 FIT_INV 34.92% YIELD 1.31% CDI PARAMETERS: FIT_UW 35.00% EFF_STANDARD 22.85% LEVERAGE 1.00 PREMIUM_TAX_RATE 2.35% SURPLUS_RATIO 1.00 UEP_RES_RATIO 0.48 LOSS_RES_RATIO 1.00

RISK FREE RATE OF RETURN 1.53% October 2014

MAXIMUM RATE OF RETURN 7.53%

MINIMUM RATE OF RETURN -6.00%

CDI CALCULATIONS:

ADJ_PREM 0 0 0 594,019,396

ADJUSTED_LOSSES 0 0 0 270,315,730

ADJUSTED_DCCE 0 0 0 25,679,994

ADJUSTED_LOSS+DCCE_RATIO 0.00% 0.00% 0.00% 49.83%

TRENDED_CURRENT_RATE_LEVEL_PREMIUM #DIV/0! #DIV/0! #DIV/0! 1.83

LOSS+DCCE_PER_EXP #DIV/0! #DIV/0! #DIV/0! 0.91

COMP_LOSS+DCCE_PER_EXP #DIV/0! #DIV/0! #DIV/0! 1.25

CRED_LOSS_PER_EXP #DIV/0! #DIV/0! #DIV/0! 0.91

ANC_INC_PER_EXP #DIV/0! #DIV/0! #DIV/0! 0.00

FIXED_INV_INC_FACTOR 1.31% VAR_INV_INC_FACTOR 1.94% ANNUAL_NET_TREND 0.00% COMP_TREND 0.00% MAX_PROFIT 11.58% MIN_PROFIT -9.23% UW_PROFIT 8.75% MAX_DENOM 0.675 MIN_DENOM 0.883 MAX_PREMIUM $1.33 MIN_PREMIUM $1.02 CHANGE_AT_MIN -44.32% CHANGE_AT_MAX -27.16%

Alternate Calculation with Reinsurance

COMMISSION_RATE 10.00%

RE_PREM - - - 234,610,951 RE_RECOV - - - 65,596,620

RE_PREM_PER_EXP #DIV/0! #DIV/0! #DIV/0! 0.72

RE_RECOV_PER_EXP #DIV/0! #DIV/0! #DIV/0! 0.20

COMP_LOSS_RE #DIV/0! #DIV/0! #DIV/0! 0.69

RMAX_PREMIUM $1.86

RCHANGE_AT_MAX 1.76%

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CALIFORNIA EARTHQUAKE AUTHORITY

RESIDENTIAL EARTHQUAKE

FILING MEMORANDUM

I. INTRODUCTION

This filing is submitted to increase coverage and coverage options to policyholders and to adjust

rate and premiums levels.

Section II describes the proposed coverage changes. Section III addresses the proposed rate and

premium changes. Section IV provides a brief overview of the supporting exhibits.

The new editions of each of the CEA’s current policy forms are included with the filing. The

new editions incorporate new coverage enhancements and clarifications in coverage, definitions

and policy language.

II. PROPOSED COVERAGE CHANGES

This filing expands the available deductible and coverage options for all products as follows:

 Deductible options - 5%, 10%, 15%, 20% and 25% (Coverage D continues to have no

deductible.)

 Coverage C, Contents - new limits include $150,000 and $200,000

 Coverage D, Loss of Use - new limits include $50,000, $75,000 and $100,000.

The primary coverage changes that are specific to a certain product are summarized below.

Homeowners and Manufactured Homes (Mobilehomes) Proposed Coverage Changes

1. Energy Efficient and Environmental Safety Replacement Upgrades

A sublimit of $25,000 is granted to pay for the replacement or upgrade of damaged

covered property with energy-efficient property. This is an increase in coverage over the

current policy.

2. Increased Building Code Upgrade Limits

Building code upgrade (BCU) coverage of $10,000 is included as an additional limit of

insurance for homeowners and manufactured homes (mobilehomes), subject to the

deductible. Homeowners can purchase an additional $10,000 of BCU for an additional

premium. This filing extends the additional coverage option to manufactured homes

(mobilehomes) and adds a new limit option of an additional $20,000, thereby raising the

maximum available amount for BCU to $30,000 for both homeowners and manufactured

homes (mobilehomes.)

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Additionally, the policy is amended to reflect that the full amount of loss covered by

BCU, up to the limit of insurance, will be applied to meet the deductible. This is an

increase in coverage over the current policy.

3. Increased Chimney Sublimit

In the current policy, losses paid for damage to any and all chimney(s) is limited to

$5,000, as a sublimit to the dwelling coverage. The CEA proposes to increase the

chimney sublimit to $10,000. This is an increase in coverage over the current policy.

4. Loss Assessment

A number of homes are located in common interest developments wherein the

homeowner is exposed to potential loss assessments for damage to common areas which

are collectively owned. To date, the CEA has not extended coverage for this exposure

under the homeowners product. The CEA proposes to grant a $10,000 sublimit for loss

assessment to cover items similar to those that are covered by the condominium loss

assessment product. This is an increase in coverage over the current policy.

5. Optional Coverage – Masonry Veneer

Exterior masonry veneer is excluded under the CEA policy. The CEA proposes to offer

an option to buy masonry veneer coverage. Because the CEA does not currently collect

any information regarding masonry veneer, in establishing the rate for this coverage, the

CEA reviewed other California earthquake insurers’ rate filings. See Exhibit 16-HO for

details.

6. Optional Coverage – Breakable Items

Breakable items such as glassware, ceramic and crystal are not covered under the CEA

coverage grant for Coverage C, contents. An optional endorsement extending coverage

to such items is included in this filing.

7. Personal Property Sublimits

The CEA proposes to add a $3,000 sublimit on each of several classes of damageable

personal property such as jewelry, collectible items and beverages. This is a restriction of

coverage over the current policy and is consistent with the treatment of these items by

other insurers.

8. Water Damage / Mold

During the policy review process, the CEA identified a potential coverage gap between

the CEA policy and the underlying residential policy in regards to precipitation entering

the structure where the opening was the direct result of earthquake damage. The revised

policy includes this damage with the existing water damage that is covered by the CEA,

subject to applicable limits and deductibles. This is an increase in coverage over the

current policy.

Because water damage can be a covered loss under the CEA policy, damage caused by

mold (fungi) is now specifically covered, subject to a $5,000 sublimit. The current policy

is silent on the issue of damage due to mold. Thus, this could be viewed as a restriction in

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coverage. However, losses due to mold are not contemplated in the current rate structure.

An exclusion for mold-related losses is consistent with the treatment of these types of

losses by other insurers.

Renters / Common Interest Development (Condominium) Proposed Coverage Changes

The current renters and common interest development (condominium) base-limits policies each

provide personal property (Coverage C) coverage subject to a $750 deductible regardless of the

amount of coverage purchased. With this filing, the CEA proposes to change the deductible

application to a percentage of the selected limit, similar to what is done for the homeowners and

manufactured homes (mobilehomes) Choice Coverage C product. Applying the deductible as a

percentage of the limit is also consistent with the manner in which other insurers provide the

coverage. This change represents a reduction in coverage resulting in lowered rates.

Common Interest Development (Condominium) Proposed Coverage Changes

Currently condominium owners can purchase Coverage A with a limit of $25,000. Additional

limits of $50,000, $75,000 and $100,000 will be available to cover this exposure.

A new Loss Assessment limit of $100,000 will also be available.

As noted above, all current and new limits will be available with deductibles of 5%, 10%, 15%,

20% and 25%.

III. SUMMARY OF RATE / PREMIUM CHANGES

The rate and premium changes proposed herein are based on an analysis of the CEA’s December

31, 2012 portfolio using the best available scientific information for assessing earthquake

frequency, severity and loss.

The resulting rate application is based on RQE (Risk Quantification & Engineering), Version 14.

This catastrophe loss model, developed by EQECAT, incorporates the latest available scientific

information consistent with the state-of-the-art knowledge of California seismic hazard, as

required by the CEA enabling legislation. The basic seismic hazard in the model was directly

developed from the June 2008 USGS-CGS time independent implementation of the Uniform

California Earthquake Rupture Forecast (UCERF2) model. EQECAT then incorporated

time-dependent probabilities into the model from data provided by the Working Group on California

Earthquake Probabilities (WGCEP 2007), which is also used in the UCERF2 model.

Vulnerability functions were also updated to be consistent with the Next Generation Attenuation

equations that are part of UCERF2. This is the same science underlying the current CEA rates

which used EQECAT USQUAKE™ WORLDCAT enterprise model (WCe 3.15.) In 2013,

EQECAT changed their modeling platform to take advantage of increased computing power

resulting in the new RQE model. However, the underlying science remains unchanged as to the

California earthquake model.

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The USGS has updated the Uniform California Earthquake Rupture Forecast– Time-Independent

Model (UCERF3.) However, the time-dependent model, upon which the CEA has historically

relied, is still under review. Rather than wait for the completion of the time-dependent model

and its incorporation into the commercial loss models which may not occur until sometime in

2016, the CEA is proceeding with the overall indicated rate reduction.

With this filing, the CEA is introducing a new hazard mitigation discount for homeowners of

10% or 20%, subject to verification that the subject home has been retrofitted in accordance with

applicable standards. The current 5% hazard mitigation discount for homeowners will continue

to be offered for new and renewal business that do not verify the retrofit. Because we do not

know how many homeowners will verify, the comparison of current to proposed premiums in

Exhibit 15 necessarily assumes that each homeowner that renews with a hazard mitigation

discount will renew with the current 5% credit. To the extent that policyholders do verify, the

overall rate reduction for homeowners policies will be greater.

IV. OVERVIEW OF SUPPORTING EXHIBITS

Although the CEA is not subject to the prior approval regulations, the CEA has, for ease of

review, completed the exhibits requested in the prior approval rate filing application. The key

exhibits for the development of the CEA rates and premiums are as follows:

EXHIBIT 5 – Premium Trend Factor

Homeowners and Manufactured Homes (mobilehomes) premiums for Coverage A – Dwelling

depend on the Coverage A amount of the underlying dwelling policy. Exhibit 5 details the

historical Coverage A amounts to develop an expected total amount of exposure for the period

that the rates will be in effect, which is the combined effect of exposure growth (increases in the

average Coverage A amount) and policy growth (anticipated increases in the number of policies

sold.) For the remaining coverages (Coverage C, Coverage D, and building code upgrade

coverage), the calculated premium trend factor is mainly a function of the policy growth, as the

policy limits are fixed.

There is no frequency trend associated with earthquakes; the severity trend is equal to the total

expected increase in exposures. In other words, the calculated premium trend also functions as

the loss trend which results in a 0% net trend assumption for the ratemaking process.

EXHIBIT 12 – Reinsurance Premium and Recoverables

The CEA uses a net ratemaking approach wherein the net cost of risk financing (risk financing

premiums less the expected recoveries) is included in the rate development. Exhibit 12 details

the expected limits, premiums and recoverables.

EXHIBIT 14 – Insurer Ratemaking Calculations

The component pieces of the net ratemaking calculation are presented in this exhibit. Exhibits

14-1 through 14-3 step through the development of the loss cost multipliers. Consistent with the

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current approved rates, there is a separate loss cost multiplier for basic limits and increased

limits. Increased limits are Coverage C limits in excess of $5,000, Coverage D limits in excess

of $1,500, Building Code Upgrade limits in excess of $10,000 and deductibles lower than 15%.

Exhibit 14-4 shows the calculation of the expected investment income for 2016 using the

expected yield as calculated under the CDI methodology using the October 2014 yields posted

on the CDI website. The CEA does not currently include an underwriting profit provision in its

rates. It does, however, retain its net investment income to increase policyholder claims-paying

capacity.

EXHIBIT 15 – Rate Distribution

This exhibit displays the indicated and selected changes by product and coverage.

EXHIBIT 16 – Rate Classification Relativities

Base rates, increased limits factors and deductible factors are developed for each product and

coverage in this exhibit.

As noted above, the CEA is introducing a new classification for verified hazard mitigation for

homeowners policies. The remaining classification definitions are unchanged for homeowners

and manufactured homes (mobilehomes) coverages.

The CEA has also examined the rates for renters / condo coverages based on the latest modeled

losses. The classification definitions are not changing for these coverages.

The new limits and deductible options are based on modeled loss from EQECAT. Because these

are new products, there is no underlying distribution. Therefore, the CEA makes the assumption

that the new products will have the same distribution as the CEA portfolio at 12/31/2012. As

noted previously, the one exception to this approach is the new optional Masonry Veneer

coverage which is developed based on a review of other California earthquake insurers’ rate

filings.

Proposed policy forms

The current policies and the proposed policies are included in the submission. Immediately

preceding the policies is a summary overview of the changes to the current products policy.

Proposed rate manual

The submission includes a new CEA Rate manual. An overview of the changes to the manual is

included immediately preceding the proposed rate manual.

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Filing Number Date Filed Product

11-2233 3/11/2011 Basic / HO Choice Products

Filing Number Effective Date Product Rate Change

11-2233 7/1/2012 New HO Choice Product New coverage

11-2233 1/1/2012 Basic Product -12.5%

The rates are developed using a pure premium methodology. Consequently, historical premium is not part of the rate development calculations. Premium adjustment factors are not applicable.

EXHIBIT 3 - POLICY TERM DISTRIBUTION The policy term for all policies is one year.

EXHIBIT 4 - PREMIUM ADJUSTMENT FACTOR EXHIBIT 2 - RATE LEVEL HISTORY CALIFORNIA EARTHQUAKE AUTHORITY

RESIDENTIAL EARTHQUAKE EXHIBIT 1 - FILING HISTORY

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Homeowner exposure increases due to increases in the underlying Coverage A amount and policy growth. Policy counts and Coverage A amounts are shown below.

Policy Average

Quarter Count Coverage A Coverage A

1 3Q08 633,505 226,666,316,879 357,797 2 4Q08 629,071 228,347,513,601 362,992 3 1Q09 628,781 231,946,976,951 368,884 4 2Q09 637,015 238,882,210,140 375,002 5 3Q09 638,577 242,944,035,003 380,446 6 4Q09 640,913 246,589,327,710 384,747 7 1Q10 646,126 249,934,199,183 386,820 8 2Q10 651,925 253,034,916,276 388,135 9 3Q10 649,465 253,042,198,713 389,616 10 4Q10 647,542 253,108,775,707 390,876 11 1Q11 652,045 255,671,727,275 392,107 12 2Q11 655,264 258,228,649,309 394,083 13 3Q11 653,599 259,213,136,862 396,594 14 4Q11 652,404 260,958,414,679 399,995 15 1Q12 652,657 263,443,922,368 403,648 16 2Q12 657,175 268,177,755,287 408,077 17 3Q12 661,357 272,478,567,569 411,999 18 4Q12 664,875 275,642,979,097 414,579 19 1Q13 664,080 276,767,390,598 416,768 20 2Q13 664,035 278,523,840,691 419,442 21 3Q13 662,698 280,143,367,235 422,732 22 4Q13 663,316 282,603,811,527 426,047 23 1Q14 665,827 285,701,020,166 429,092 24 2Q14 673,104 290,921,231,025 432,208 590,078 246,344,855,009 417,478

Policy Growth Coverage A Growth

8-point 0.006 8-point 0.028

12-point 0.009 12-point 0.031

16-point 0.009 16-point 0.030

20-point 0.009 20-point 0.027

24-point 0.010 24-point 0.030

(A) Selected 0.010 (B) Selected 0.030

(C) Effective Date 1/1/2016

(D) Modeled Portfolio Run Date 12/31/2012

(E) Trend Period 4.00

(F) Exposure Growth 1.126

(G) Policy Growth 1.035

HOMEOWNERS

CALIFORNIA EARTHQUAKE AUTHORITY RESIDENTIAL EARTHQUAKE EXHIBIT 5 - PREMIUM TREND FACTOR

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Manufactured home (mobilehome) exposure increases due to increases in the underlying Coverage A amount and policy growth. Policy counts and Coverage A amounts are shown below.

Policy Average

Quarter Count Coverage A Coverage A

1 3Q08 19,074 1,297,155,022 68,006 2 4Q08 19,434 1,351,739,362 69,555 3 1Q09 18,168 1,279,023,325 70,400 4 2Q09 19,985 1,438,291,970 71,969 5 3Q09 20,677 1,518,324,418 73,431 6 4Q09 21,109 1,571,571,896 74,450 7 1Q10 22,694 1,710,181,618 75,358 8 2Q10 24,513 1,867,779,648 76,195 9 3Q10 24,449 1,882,762,461 77,008 10 4Q10 24,412 1,895,001,423 77,626 11 1Q11 24,360 1,907,414,932 78,301 12 2Q11 24,442 1,931,166,270 79,010 13 3Q11 24,897 1,982,988,492 79,648 14 4Q11 25,518 2,041,050,616 79,985 15 1Q12 26,074 2,097,137,494 80,430 1.005569522 16 2Q12 26,518 2,149,481,204 81,057 17 3Q12 26,442 2,166,779,103 81,945 18 4Q12 26,274 2,169,476,898 82,571 19 1Q13 26,116 2,170,818,327 83,122 20 2Q13 26,027 2,180,833,658 83,791 21 3Q13 26,332 2,220,429,244 84,324 1.048416503 22 4Q13 26,683 2,262,342,713 84,786 23 1Q14 26,967 2,299,356,241 85,266 24 2Q14 27,415 2,345,662,637 85,561 4Q11 24,423 1,895,871,122 77,626 0.933884102

Policy Growth Coverage A Growth

8-point 0.022 8-point 0.025

12-point 0.023 12-point 0.028

16-point 0.031 16-point 0.029

20-point 0.047 20-point 0.032

24-point 0.066 24-point 0.038

(A) Selected 0.030 (B) Selected 0.030

(C) Effective Date 1/1/2016

MANUFACTURED HOMES (MOBILEHOMES) CALIFORNIA EARTHQUAKE AUTHORITY

RESIDENTIAL EARTHQUAKE EXHIBIT 5 - PREMIUM TREND FACTOR

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Renter / condo exposure increases due to policy growth and increases in Coverage amounts. Policy counts and average coverage amounts are shown below.

Policy Average

Quarter Count Coverage Amount

1 3Q08 130,960 74,530 2 4Q08 130,787 75,071 3 1Q09 133,682 75,668 4 2Q09 135,632 76,107 5 3Q09 137,207 76,625 6 4Q09 137,638 77,103 7 1Q10 138,203 77,205 8 2Q10 139,297 77,341 9 3Q10 139,311 77,450 10 4Q10 138,947 77,474 11 1Q11 141,043 77,032 12 2Q11 142,422 76,908 13 3Q11 142,477 76,895 14 4Q11 143,022 76,751 15 1Q12 144,266 76,643 16 2Q12 145,937 76,626 17 3Q12 148,200 76,631 18 4Q12 150,354 76,634 19 1Q13 151,132 76,639 20 2Q13 151,397 76,886 21 3Q13 151,217 77,113 22 4Q13 151,837 77,307 23 1Q14 153,071 77,610 24 2Q14 155,701 77,828 4Q11

Policy Growth Coverage Growth

8-point 0.022 0.010 12-point 0.031 0.005 16-point 0.031 0.001 20-point 0.028 0.000 24-point 0.029 0.003 (A) Selected 0.030 (B) 0.000 (C) Effective Date 1/1/2016

CALIFORNIA EARTHQUAKE AUTHORITY RESIDENTIAL EARTHQUAKE EXHIBIT 5 - PREMIUM TREND FACTOR

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2011 2012 2013 1. Installment Fee Income 440,633 444,984 412,957

(A.S., page 4, line 13)

2. Earned Premium 605,793,843 588,502,379 568,729,298

3. Miscellaneous Fees % of Premium 0.07% 0.08% 0.07%

(1) / (2)

CALIFORNIA EARTHQUAKE AUTHORITY RESIDENTIAL EARTHQUAKE

EXHIBIT 6 - MISCELLANEOUS FEES AND OTHER CHARGES

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The modeled losses used to develop the rate indication are ultimate losses. Therefore, the loss development factors are 1.00 and there is no loss development shown in Exhibit 14.

Loss adjustment expenses are paid by the participating insurance companies per contract at 9% of loss. Therefore, the LAE development factors are also 1.00.

There is no expected loss or DCCE trend associated with this program other than the general trend in severity due to increasing coverage amounts and policy growth. Thus loss and DCCE trend factors and premium trend factors are the same. See Exhibit 5.

Full credibility is given to the modeled average annual losses.

There is no ancillary income as defined in the CDI rate filing instructions. EXHIBIT 10 - CREDIBILITY ADJUSTMENT

EXHIBIT 11 - ANCILLARY INCOME CALIFORNIA EARTHQUAKE AUTHORITY

RESIDENTIAL EARTHQUAKE

EXHIBIT 8 - LOSS AND DCCE TREND

EXHIBIT 9 - CATASTROPHE ADJUSTMENT

This is a catastrophe line. Average annual losses have been modeled using the EQECAT RQE Version 14. See Filing Memorandum.

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Total Basic Limits Increased Limits (1) Total Risk Transfer 4,449,000 3,839,487 609,513 (2) Premium 229,611 198,154 31,457 (3) Expected Recoveries 65,597 56,610 8,987 (4) Brokerage Expenses 5,000 4,315 685 (5) Net Cost 169,014 145,859 23,155 Notes: (1)

(2) Expected cost of risk financing

(3) Expected recoveries based on modeled losses, risk financing attachment level and limit (4) Broker fees paid in addition to reinsurance premium based on contractual agreements (5) = (3) - (4) + (5)

Estimated additional risk transfer limit needed to maintain target claims paying capacity after consideration of all other forms of claims paying capacity

EXHIBIT 12 - REINSURANCE PREMIUM AND RECOVERABLES RISK FINANCING COSTS

(Thousands)

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CALIFORNIA EARTHQUAKE AUTHORITY RESIDENTIAL EARTHQUAKE EXHIBIT 13 - REQUEST FOR VARIANCE

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The method used in the development of the rate level indication relies primarily on modeled earthquake losses. Exhibit 14-3 shows the development of the total needed premium and the resulting loss cost multiplier that is applied to the loss costs for each policy type.

(1) Adjusted Average Annual Losses

Modeled losses for the CEA portfolio as of December 31, 2012 adjusted for policy features and growth.

(2) Loss Adjustment Expenses - Member Paid

Per the Participating Insurer Agreement, the CEA pays the participating insurers 9% of the loss for adjusting claims. Calculated as Line (1) x 9%.

(3) Loss Adjustment Expenses - CEA Paid

Estimated adjusting and other expense that the CEA pays. Calculated as Line (1) x .5%. (4) Indicated Provision for Loss and Loss Adjustment Expense

Sum of lines (1), (2), and (3). (5) Expenses - Participating Insurers

Per the Insurer Participation Agreement, the CEA pays the participating insurers 6% of the net written CEA premium attributable to the Participating Insurer, not including any loading for reinsurance, capital costs or producer commission.

(6) Premium, Net of Commission, Tax and Risk Financing Costs

Interim calculation in order to determine the proper load for the participating insurers expenses, line (5). Calculated as line (4) / (1.0 - 6%).

(7) Risk Financing Costs

Estimated cost of risk financing. See Exhibit 12. (8) Recoveries

Estimated losses recovered from risk financing sources based on modeled losses. (9) Reinsurance Brokerage Fees

The CEA pays its reinsurance intermediary fees per contract, not under a commission agreement. (10) Annual Risk Capital Surcharge

Additional capital paid by new participating insurers subject to CIC 10089.16 (d). Note: there are no monies due or expected.

(11) Estimated Net Cost of Risk Financing

Calculated as line (7) - line (8) + line (9) - line (10) (12) Premium Net of Commissions and Tax

Calculated as line (6) + line (11)

EXHIBIT 14-1 - INSURER'S RATEMAKING CALCULATIONS

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(13) Commission

By regulation, the CEA pays 10% commission. Calculated as line (17) x 10%. (14) CEA Operating Expenses

By statute, the CEA operating expenses are capped at 6% of premium. Calculated as line (17) x 6%.

(15) State Premium Tax

Calculated as line (17) x 2.35%. (16) Underwriting Profit Provision

See Exhibit 14-4. (17) Total Premium

Calculated as the sum of lines (12) through (16). (18) Loss Cost Multiplier

Calculated as line (17) / line (1). (19) Selected Loss Cost Multiplier

Selection based on line (18). (20) Filed Loss Cost Multiplier

Loss cost multiplier underlying current filed rates for basic and increased limits coverage. (21) Change due to change in loss cost multiplier

Calculated as line (19) / line (20) - 1.0.

EXHIBIT 14-2 - INSURER'S RATEMAKING CALCULATIONS CALIFORNIA EARTHQUAKE AUTHORITY

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Basic Increased Limits Limits

(1) Adjusted Average Annual Loss 249,717 20,599

(2) Loss Adjustment Expense - Member paid 9% 22,474 1,854 (1) X 9%

(3) Loss Adjustment Expense - CEA paid 0.5% 1,249 103 (1) X .5%

(4) Indicated Provision for Loss and LAE 273,440 22,556 (1) + (2) + (3)

(5) Expenses - Participating Insurers 6% 17,454 1,440 (6) x 6%

(6) Premium Net of Commission, Tax and Risk Financing Costs 290,893 23,996 (4) / (1.0 - 6%)

(7) Risk Financing Costs 198,154 31,457

(8) Expected Recoveries 56,610 8,987

(9) Reinsurance Brokerage Fees 4,315 685

(10) Annual Risk Capital Surcharge - -(11) Estimated Net Cost of Risk Financing 145,859 23,155

(7) - (8) + (9) - (10)

(12) Premium Net of Commission and Tax 436,753 47,151 (6) + (11)

(13) Commission 10% 53,491 5,775

(17) x 10%

(14) CEA Operating Expense 6% 32,094 3,465

(17) x 6%

(15) State Premium Tax 2.35% 12,570 1,357

(17) x 2.35%

(16) Underwriting Profit Provision 0.0% -

-(17) Total Premium 534,908 57,747

(12) + (13) + (14) + (15) + (16)

(18) Loss Cost Multiplier 2.14 2.80

(17) / (1)

(19) Selected Loss Cost Multiplier 2.14 2.80

(20) Filed Loss Cost Multiplier 2.22 2.71

(21) Change due to change in Loss Cost Multiplier -3.5% 3.3%

(19) / (20) - 1.0

(Thousands)

EXHIBIT 14-3 - INSURER'S RATEMAKING CALCULATIONS DEVELOPMENT OF LOSS COST MULTIPLIER

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(1) Available Capital 4,737,999

(2) Implied Rate of Return 1.37%

(3) Target after-tax return 65,106

(4) Unearned Premium Reserve 244,619

(5) Loss and LAE Reserves 262,001

(6) Investment Yield 1.31%

(7) Return on Invested Assets 68,533

(8) Mitigation Fund (lesser of 5% of (7) or $5M) 3,427

(9) Expected Investment Income net of mitigation fund 65,106

(10) Selected pre-tax underwriting profit provision 0.0%

Notes:

(1) Projected CEA Capital at 7/1/2016 (assuming expected earthquake loss to CEA capital layer.)

(2)

(3) (1) * (2)

(4) 50% of projected net premium (Exhibit 14-3, line 17 less line 11 plus line 8) (5) Expected Loss and LAE to CEA Capital layer

(6) CDI Exhibit Page 14c (7) (6) * [(1) + (4) + (5)] (8) Per CIC 10089.37 (9) (7) - (8)

(1) / (9) The CEA retains its investment income in order to increase policyholder claims paying capacity. This is equivalent to targeting a rate of return equal to the investment return and offsetting the rates for the expected investment income.

(Thousands)

EXHIBIT 14-4 - INSURER'S RATEMAKING CALCULATIONS DEVELOPMENT OF UNDERWRITING PROFIT PROVISION

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Projected Projected

CEA PRODUCT Indicated Selected Indicated Current Selected

Change Change Premium Premium Premium

(1) (2) (3) (4) (5) Dwellings Coverage A -6.8% -6.8% 467,426,696 501,487,892 467,426,696 Coverage C - Standard -31.6% -31.5% 49,865,419 72,940,565 49,935,119 Coverage C - Choice 4.4% 2.8% 905,996 868,205 892,711 Coverage D 19.2% 20.9% 21,360,963 17,927,267 21,665,569 Coverage F -7.3% -9.6% 1,365,967 1,473,847 1,332,553 SUBTOTAL -9.0% -9.0% 540,925,042 594,697,775 541,252,648

Manufactured Homes (mobilehomes)

Coverage A 1.7% 1.4% 2,878,274 2,831,176 2,872,119 Coverage C - Standard -30.4% -30.0% 542,126 779,245 545,261 Coverage C - Choice 21.9% 21.6% 4,959 4,067 4,947 Coverage D 53.0% 53.0% 228,424 149,299 228,424 SUBTOTAL -2.9% -0.7% 3,653,782 3,763,787 3,738,834 Condominiums Coverage A 3.8% 4.0% 8,420,572 8,109,270 8,435,326 Coverage E 32.3% 32.4% 29,346,474 22,180,220 29,369,595 Renters/Condos Coverage C -52.0% -51.7% 7,019,882 14,627,127 7,063,740 Coverage D 20.6% 20.9% 3,718,430 3,083,831 3,728,246 SUBTOTAL 1.1% 1.2% 48,505,358 48,000,448 48,596,907 TOTAL -8.3% -8.2% 593,084,182 646,462,010 593,588,389

CALIFORNIA EARTHQUAKE AUTHORITY RESIDENTIAL EARTHQUAKE EXHIBIT 15 - RATE DISTRIBUTION

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Indicated and proposed rates and policy premiums are detailed in the subsequent exhibits. CALIFORNIA EARTHQUAKE AUTHORITY

RESIDENTIAL EARTHQUAKE

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CEA Current Indicated Selected

Territory Rate per $1,000 Rate per $1,000 Rate per $1,000 Change

(1) (2) (3) (4) (5) 2 3.75 3.98 3.98 6.1% 4 3.03 3.14 3.14 3.6% 5 3.72 3.61 3.61 -3.0% 6 2.10 2.07 2.07 -1.4% 7 1.81 1.60 1.60 -11.6% 8 2.83 2.74 2.74 -3.2% 11 2.41 2.30 2.30 -4.6% 12 2.03 1.89 1.89 -6.9% 13 1.39 1.30 1.30 -6.5% 15 1.47 1.39 1.39 -5.4% 18 0.51 0.47 0.47 -7.8% 19 1.31 1.19 1.19 -9.2% 20 1.90 1.64 1.64 -13.7% 22 3.09 2.67 2.67 -13.6% 23 1.93 1.69 1.69 -12.4% 24 1.74 1.49 1.49 -14.4% 25 1.86 1.69 1.69 -9.1% 26 2.13 1.91 1.91 -10.3% 27 0.42 0.39 0.39 -7.1%

CALIFORNIA EARTHQUAKE AUTHORITY EXHIBIT 16-HO

COVERAGE A - 15% DEDUCTIBLE RATE DEVELOPMENT HOMEOWNER DWELLINGS

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Territory Rate per policy Rate per policy Rate per policy Change

(1) (2) (3) (4) (5) 2 95.89 100.85 101 5.3% 4 71.01 79.56 80 12.7% 5 89.91 91.47 91 1.2% 6 55.96 52.45 52 -7.1% 7 52.41 40.54 41 -21.8% 8 73.05 69.43 69 -5.5% 11 62.78 58.28 58 -7.6% 12 61.17 47.89 48 -21.5% 13 56.45 32.94 33 -41.5% 15 56.35 35.22 35 -37.9% 18 13.95 11.91 12 -14.0% 19 40.92 30.15 30 -26.7% 20 74.07 41.56 42 -43.3% 22 114.76 67.66 68 -40.7% 23 87.76 42.82 43 -51.0% 24 77.65 37.76 38 -51.1% 25 43.39 42.82 43 -0.9% 26 67.15 48.40 48 -28.5% 27 13.28 9.88 10 -24.7%

STANDARD COVERAGE C - $5,000, 15% DEDUCTIBLE RATE DEVELOPMENT

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(1) (2) (3) (4) (5) 2 230 265.87 266 15.7% 4 167 223.12 223 33.5% 5 176 244.98 245 39.2% 6 158 175.28 175 10.8% 7 116 132.05 132 13.8% 8 183 201.42 201 9.8% 11 138 155.89 156 13.0% 12 147 160.32 160 8.8% 13 133 148.57 149 12.0% 15 92 100.17 100 8.7% 18 51 58.57 59 15.7% 19 98 113.17 113 15.3% 20 143 161.61 162 13.3% 22 147 177.03 169 15.0% 23 108 123.59 124 14.8% 24 110 123.05 123 11.8% 25 68 112.15 76 11.8% 26 127 143.82 144 13.4% 27 49 57.13 57 16.3%

RATE DEVELOPMENT

CHOICE COVERAGE C - $5,000, 15% DEDUCTIBLE HOMEOWNER DWELLINGS

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(1) (2) (3) (4) (5) 2 34 38.41 38 11.8% 4 27 33.92 34 25.9% 5 29 33.09 33 13.8% 6 23 31.18 31 34.8% 7 20 20.67 21 5.0% 8 26 34.71 35 34.6% 11 22 26.44 26 18.2% 12 22 27.05 27 22.7% 13 21 27.55 28 33.3% 15 16 18.37 18 12.5% 18 9 10.97 11 22.2% 19 19 21.84 22 15.8% 20 24 27.27 27 12.5% 22 27 24.55 25 -7.4% 23 22 20.71 21 -4.5% 24 19 18.06 18 -5.3% 25 13 11.91 12 -7.7% 26 21 22.10 22 4.8% 27 8 10.54 11 37.5% HOMEOWNER DWELLINGS CALIFORNIA EARTHQUAKE AUTHORITY

EXHIBIT 16-HO

COVERAGE D - $1,500 RATE DEVELOPMENT

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(1) (2) (3) (4) (5) 2 41 44.13 44 7.3% 4 32 34.11 34 6.3% 5 41 40.57 41 0.0% 6 22 21.89 22 0.0% 7 20 17.49 17 -15.0% 8 30 29.65 30 0.0% 11 26 25.53 26 0.0% 12 22 20.66 21 -4.5% 13 15 14.39 14 -6.7% 15 17 15.98 16 -5.9% 18 5 4.58 5 0.0% 19 14 12.55 13 -7.1% 20 21 18.45 18 -14.3% 22 36 31.30 31 -13.9% 23 22 19.77 20 -9.1% 24 20 17.35 17 -15.0% 25 21 19.16 19 -9.5% 26 24 21.74 22 -8.3% 27 4 3.59 4 0.0%

RATE DEVELOPMENT HOMEOWNER DWELLINGS

BUILDING CODE UPGRADE COVERAGE - $20,000

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Current Indicated Selected

Number of Stories Relativity Relativity Relativity Change

(1) (2) (3) (4) (5)

One-Story 0.95 0.91 0.91 -4.2% Greater than One-Story 1.05 1.09 1.09 3.8%

Construction / Age Current Indicated Selected

Foundation Relativity Relativity Relativity Change

(1) (2) (3) (4) (5)

Frame Pre-1940, Raised 1.263 1.808 1.563 23.8% Frame Pre-1940, All Other 1.200 1.307 1.250 4.2% Frame 1940-1959, Raised 1.053 1.213 1.188 12.8% Frame 1940-1959, All Other 1.000 0.933 0.950 -5.0% Frame 1960-1979, Raised 1.158 1.168 1.200 3.6% Frame 1960-1979, All Other 1.100 1.079 1.080 -1.8% Frame 1980-1989 0.850 0.761 0.800 -5.9% Frame Post-1989 0.700 0.585 0.650 -7.1% Other 1.900 1.677 1.900 0.0%

Construction / Age Current

Foundation Relativity Self-declare Verified

Frame Pre-1940, Raised 0.95 0.95 0.80

Frame 1940-1959, Raised 0.95 0.95 0.80

Frame 1960-1979, Raised 0.95 0.95 0.90

All Other 1.00 1.00 1.00

The hazard reduction factor is available to pre-1979 frame homes on a raised

foundation and selected such that a qualifying home will have the same rate as a similar vintage home on a slab/other foundation provided the home has a secured (bolted) foundation, braced cripple walls, if any, and a strapped water heater in accordance with applicable building codes and that such state is verified. In the event the retrofit work is not verified, the current 5% discount will continue to apply if the policyholder self-declares that the raised foundation has been bolted, braced, if needed, and the water heater is strapped.

of calculating the overall rate change for Dwellings in Exhibit 15, it is assumed that no policyholder will verify. To the extent policyholders do verify and receive the greater discount, the overall rate decrease will be greater than is shown on Exhibit 15.

Note: We do not know how many policyholders will verify their retrofits. For the purpose HAZARD REDUCTION

STORIES

CONSTRUCTION / AGE / FOUNDATION RATE CLASSIFICATION RELATIVITIES CALIFORNIA EARTHQUAKE AUTHORITY

EXHIBIT 16-HO

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Coverages A

C - Basic Current Indicated Selected

& BCU Relativity Relativity Relativity Change

(1) (2) (3) (4) (5) 5% 1.80 1.80 10% 1.32 1.33 1.33 0.8% 15% 1.00 1.00 1.00 0.0% 20% 0.81 0.81 25% 0.67 0.67

Note: Coverage D is provided with no deductible so deductible factors do not apply.

Coverage C Current Indicated Selected

Basic Relativity Relativity Relativity Change

(1) (2) (3) (4) (5) 5,000 1.00 1.00 1.00 0.0% 25,000 4.53 2.39 2.39 -47.3% 50,000 6.54 4.13 4.13 -36.9% 75,000 7.53 5.27 5.27 -30.0% 100,000 7.80 6.63 6.63 -15.0% 150,000 6.88 6.88 200,000 7.41 7.41

Current Indicated Selected

Coverage D Relativity Relativity Relativity Change

(1) (2) (3) (4) (5) 1,500 1.00 1.00 1.00 0.0% 10,000 2.50 2.70 2.70 8.2% 15,000 3.29 3.47 3.47 5.5% 25,000 3.76 4.25 4.25 12.9% 100,000 6.27 6.27 150,000 7.62 7.62 200,000 9.07 9.07

HOMEOWNER DWELLINGS RATE CLASSIFICATION RELATIVITIES

ADDITIONAL LIMITS DEDUCTIBLE FACTORS

ADDITIONAL LIMITS

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Coverage C CHOICE 5,000 25,000 50,000 75,000 100,000 150,000 200,000 5% 1.08 2.54 3.39 3.97 4.47 5.14 5.75 10% 1.04 2.29 2.92 3.33 3.68 4.09 4.47 15% 1.00 2.08 2.56 2.86 3.11 3.37 3.62 20% 0.97 1.91 2.28 2.49 2.67 2.83 2.99 25% 0.94 1.76 2.04 2.19 2.32 2.41 2.52 Coverage C CHOICE 5,000 25,000 50,000 75,000 100,000 150,000 200,000 5% 1.08 2.54 3.39 3.97 4.47 5.14 5.75 10% 1.04 2.29 2.92 3.33 3.68 4.09 4.47 15% 1.00 2.08 2.56 2.86 3.11 3.37 3.62 20% 0.97 1.91 2.28 2.49 2.67 2.83 2.99 25% 0.94 1.76 2.04 2.19 2.32 2.41 2.52 Coverage C CHOICE 5,000 25,000 50,000 75,000 100,000 10% 1.04 2.43 3.00 3.28 4.26 15% 1.00 2.19 2.79 3.04 4.00 Coverage C CHOICE 5,000 25,000 50,000 75,000 100,000 10% -0.2% -5.6% -2.8% 1.6% -13.7% 15% 0.0% -5.1% -8.2% -6.0% -22.3% Indicated Selected Optional Coverage Relativity Relativity

(1) (2) (3)

Coverage C - Breakables 1.61 1.60

Masonry Veneer* 1.10

*The selected relativity for masonry veneer coverage is based on a review of stand-alone earthquake insurer filings.

Several insurers will not write construction that is more than 1/3 masonry veneer (e.g., Pacific Specialty, CDI File #13-8764) Of those that do offer coverage for masonry veneer it is rated as an additional amount over the frame construction rates. Bankers Standard, CDI File #11-7851 charges 10% over the frame rate.

Chartis Property/Casualty, CDI File #11-8413 charges 70% over the frame rate.

Privilege Underwriters Reciprocal Exchange, CDI File #14-2385 charges 40%-90% over the frame rate depending on age. Copies of the relevant rating pages are included for convenience.

ADDITIONAL COVERAGES

Selected

Current

Change

RATE CLASSIFICATION RELATIVITIES HOMEOWNER DWELLINGS ADDITIONAL LIMITS / DEDUCTIBLE

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Bankers Standard Insurance Company

Earthquake Rating Factors

YEAR BUILT/CONSTRUCTION FACTORS:

DWELLING: Non-Retrofit Construction Factors

Year Built Steel Moment Frame Frame Masonry Veneer* Masonry

Post 1997 0.8 1 1.1 3.75 1990 to 1997 0.8 1 1.1 3.75 1976 to 1989 0.88 1.10 1.21 3.75 1974 - 1975 0.88 1.10 1.21 3.75 1945 – 1973 0.96 1.20 1.32 3.75 1940 – 1944 1.84 2.3 2.53 3.75 Prior to 1940 1.84 2.3 2.53 3.75

DWELLING: Retrofit Construction Factors

Post 1997 0.8 1.00 1.1 3.75 1990 to 1997 0.8 1.00 1.1 3.75 1976 to 1989 0.8 1.00 1.1 3.75 1974 – 1975 0.8 1.00 1.1 3.75 1945 – 1973 0.88 1.10 1.21 3.75 1940 – 1944 0.96 1.33 1.54 3.75 Prior to 1940 0.96 1.33 1.54 3.75

These risks qualify for Retrofit Construction Factors if all of the following criteria are met:

1) the foundation anchor bolts comply with Chapter 29, section 2907, subdivision (f) of the 1991 edition of the Uniform Building Code of the International Conference of Building Officials;

2) the bracing of cripple walls comply with Chapter 25, section 2517, subdivision (g), paragraph (4) of the 1991edition of the Uniform Building Code of the International Conference of Building Officials;

3) the bracing, anchoring or strapping of water heaters to resist falling or horizontal displacement due to an earthquake comply with section 19215 of the Health and Safety Code.

CONDO/CO-OP/TENANT: Construction Factors

All Years 0.8 1 1.1 1.5

*Attach HOME619 – California Earthquake Masonry Veneer Coverage

*Masonry Veneer construction is defined as exterior walls veneered 30% or more with brick or stone.

Effective 02-22-12 CALIFORNIA Home

7.7

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CALIFORNIA

RATE PAGES

F. Construction Type / Year built factor

Year Built Construction Type Pre-1937 1937–1973 1974–1988 1989–2000 Post 2000 Frame 1.69 1.37 1.18 1.06 1.00 Masonry 5.18 4.20 3.62 3.25 3.06

Masonry Veneer /Other 2.84 2.30 1.98 1.78 1.68

Superior 1.60 1.25 1.05 0.90 0.80 G. Retrofit factor Year Built Retrofit Year Pre-1937 1937–1973 1974–1988 1989–2000 1937–1973 0.86 1.00 1.00 1.00 1974–1988 0.76 0.94 1.00 1.00 1989–2000 0.67 0.83 0.96 1.00 Post 2000 0.61 0.75 0.87 0.97

H. Number of Stories factor

Houses with 3 or more stories will get a factor of 1.16. Houses with less than 3 stories are rated with a factor 1.00.

I. Support

If a house is supported by stilts, post, or cantiliver the support factor is 1.22. if the house is not supported the factor is 1.00.

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Privilege Underwriters Reciprocal Exchange

Homeowners Multi-Peril – California

Earthquake Manual Supplement

Revision Date: 3/11/2014

EQ‐11

iii. MMI Factor

Modified Mercalli Intensity Factor ≤ 7.3 1.00 7.4 1.05 7.5 1.10 7.6 1.15 7.7 1.20 7.8 1.25 7.9 1.30 8.0 1.35 8.1 1.40 8.2 1.45 8.3 1.50 8.4 1.76 8.5 1.95 8.6 2.17 8.7 2.40 8.8 2.66 8.9 2.95 9.0 3.27 9.1 3.63 9.2 4.03 9.3 4.46 9.4 4.95 9.5 5.49 9.6 6.09 9.7 6.75 ≥ 9.8 7.20

iv. Construction Type/Year Built Factor Dwellings Year Built Construction Type ≤ 1945 1946 - 1973 1974 - 1988 1989 - 2000 2001 - 2006 ≥ 2007 Frame 2.40 1.40 1.25 1.15 1.00 0.90 Masonry 3.77 3.64 3.55 3.46 3.33 3.00 Masonry Veneer* / Other 3.41 2.71 2.37 2.04 1.82 1.64

Steel Moment Frame 1.70 1.30 1.10 0.95 0.85 0.77

Condo/Co-op/Tenants Year Built Construction Type ≤ 1945 1946 - 1973 1974 - 1988 1989 - 2000 2000 - 2006 ≥ 2007 Frame 2.13 1.26 1.13 1.04 0.91 0.82 Masonry 1.82 1.78 1.76 1.73 1.69 1.60 Masonry Veneer* / Other 2.58 2.24 2.07 1.91 1.80 1.71

Steel Moment Frame 1.83 1.41 1.20 1.04 0.93 0.85

* Attach Endorsement PHVH-080-CA – Earthquake Masonry Veneer Coverage - California

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Territory Rate per $1,000 Rate per $1,000 Rate per $1,000 Change

(1) (2) (3) (4) (5) 2 2.83 2.94 2.94 3.9% 4 2.85 2.73 2.73 -4.2% 5 2.76 2.88 2.88 4.3% 6 2.10 2.11 2.11 0.5% 7 1.36 1.36 1.36 0.0% 8 2.61 2.65 2.65 1.5% 11 2.25 2.20 2.20 -2.2% 12 1.93 1.94 1.94 0.5% 13 1.14 1.13 1.13 -0.9% 15 1.12 1.16 1.16 3.6% 18 0.44 0.45 0.45 2.3% 19 1.05 1.09 1.09 3.8% 20 1.50 1.38 1.38 -8.0% 22 2.19 2.15 2.15 -1.8% 23 1.47 1.52 1.52 3.4% 24 1.26 1.27 1.27 0.8% 25 1.32 1.35 1.35 2.3% 26 2.09 2.10 2.10 0.5% 27 0.38 0.39 0.39 2.6% RATE DEVELOPMENT COVERAGE A - 15% DEDUCTIBLE MANUFACTURED HOMES (MOBILEHOMES)

CALIFORNIA EARTHQUAKE AUTHORITY EXHIBIT 16-MH