BILL ANALYSIS
AB 2746
Page 1
Date of Hearing: April 21, 2010
ASSEMBLY COMMITTEE ON INSURANCE
Jose Solorio, Chair
AB 2746 (Blakeslee) - As Amended: April 8, 2010
SUBJECT : California Earthquake Authority: mitigation officer
SUMMARY : Authorizes the California Earthquake Authority (CEA)
to contract for the services of a chief mitigation officer and
describes the general duties of that officer. Specifically,
this bill :
1)Authorizes the CEA to contract for the services of a chief
mitigation officer.
2)Requires the governing board of the CEA to establish the
duties of the chief mitigation officer which shall include the
following:
a) Program activities that mitigate against seismic risk
that will help homeowners, other property owners including
landlords with smaller holdings, and the general public;
b) Collaboration with academic institutions, nonprofit
entities, and commercial business entities in joint efforts
to conduct mitigation-related research and educational
activities, and conduct program activities to mitigate
against seismic risk;
c) Programs to provide financial assistance in the form of
loans, grants, rebates, or other financial incentives to
help mitigate against seismic risk, including structural
and contents retrofitting of residential structures; and
d) Collaboration and joint programs with local, state, and
federal agencies that may further California's disaster
preparedness, protection, and mitigation goals.
3)Authorizes the CEA to accept grants and gifts of real or
personal property and services for the Earthquake Loss
Mitigation Fund or the related residential retrofit program
from federal, state, and local government sources and private
sources.
AB 2746
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EXISTING LAW:
1)Authorizes the governing board of the California Earthquake
Authority (CEA) to conduct the affairs of the CEA and
specifies its powers. Among its powers are to: employ or
contract with officers and employees to administer the CEA,
retain outside actuarial and geological professionals, invest
moneys, obtain reinsurance, issue bonds, and employ bond
counsel and financial consultants in connection with the
issuance of bonds.
2)Specifies that the CEA may contract for the services of a
chief executive officer, a chief financial officer, and an
operations manager. Additionally, the CEA may contract for
the services of reinsurance intermediaries, financial market
underwriters, modeling firms, a computer firm, an actuary, an
insurance claims consultant, counsel, and private money
managers. For these purposes, the CEA is not considered a
state agency or other public agency.
FISCAL EFFECT : Undetermined.
COMMENTS :
1)Purpose . The purpose of this bill is to authorize the CEA to
contract for the services of a chief mitigation officer with
specified duties.
2)Background . According to the Working Group on California
Earthquake Probabilities, there is a 99% chance of a magnitude
6.7 or greater earthquake striking California within the next
30 years. The author states that according to CEA estimates,
a region such as Los Angeles could experience $100 billion in
residential property losses. In San Francisco, 80 percent of
the weakest wood-framed buildings (an estimated 2,000
buildings) are expected to collapse or become damaged beyond
repair in a large earthquake (7.2 magnitude). Agencies advise
that an effective retrofit program would dramatically reduce
this damage.
According to the author, the CEA has recommended the
establishment of a Chief Mitigation Officer position to
enhance the organization's mitigation efforts and effectively
utilize the Loss Mitigation Fund to help protect California.
Currently, this fund has approximately $12 million available
AB 2746
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to providing loans to retrofit homes but relatively few
homeowners have taken out these loans.
3)Arguments in Support . The author states that homeowners feel
little urgency to retrofit their homes and opt to discount the
threat of an earthquake by pushing off a home retrofit. With
a large earthquake getting closer by the day, this is a
dangerous strategy. Effective use of the Loss Mitigation Fund
by the Chief Mitigation Officer will assist homeowners to
retrofit their homes and prepare for a major earthquake.
Without appropriate mitigation retrofits, experts estimate
that tens to hundreds of thousands of homes in high population
centers like Southern California and San Francisco will be
destroyed, leaving thousands of families homeless.
Since the Chief Mitigation Officer's salary will be subject to
the 3% operating expense ceiling, just as the CEO's and the
CFO's, there will be no increase in the cost to rate payers.
4)Prior legislation . In 2009, this Committee and the
Legislature approved AB 43 (Blakeslee) which proposed to
create the position of Chief Mitigation Officer in the CEA and
to eliminate a cap on the number of civil service employees
that may be employed by the CEA. The Governor vetoed AB 43
and stated that he was supportive of establishing the Chief
Mitigation Officer in the CEA, and that his veto was based on
his opposition to eliminating the limit on the number of civil
service employees in the CEA.
REGISTERED SUPPORT / OPPOSITION :
Support
United Policyholders
Opposition
None received.
Analysis Prepared by : Manny Hernandez / INS. / (916) 319-2086