CEA slightly lifts risk transfer tower after $306m June renewal

The California Earthquake Authority (CEA) purchased $306 million of new reinsurance limit at its June 1st renewal, taking the entity’s total reinsurance and risk transfer tower to approximately $9.15 billion.

At the end of 2023, the CEA had $9.1 billion of protection in-force from its reinsurance and cat bonds, and after the expiration of contracts and renewals at January and April, the earthquake insurer’s risk transfer tower stood at just under $9.1 billion as of April 30th, so remained stable.

In April, the insurer secured almost $1.2 billion in new protection, meaning it had renewed $3.73 billion of reinsurance so far in 2024.

This has now increased after the CEA’s June renewal when it added $306 million of new reinsurance, which replaced expiring contracts and added $70 million in incremental reinsurance limit.

So, from the end of April to the end of June, the overall risk transfer program has increased in size by less than 1%.

For 2024, the CEA’s risk transfer budget was set at $585 million, and by the end of April just over $220 million had been used. After the June renewals, the total cost of the program so far in 2024 increased to just over $326 million, leaving around $260 million of the budget.

Through July, a further $655.5 million of reinsurance limit is set to expire, so it will be interesting to see the CEA’s next risk transfer disclosure and how the insurer’s tower changed at the mid-year renewals, as the CEA works to control its reinsurance buying needs.

It’s worth noting that after the June renewals, with the tower sitting at just over $9.15 billion, catastrophe bonds still make up 25% of its available reinsurance limit.

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