BILL ANALYSIS Ó
AB 1429
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Date of Hearing: April 22, 2015
ASSEMBLY COMMITTEE ON INSURANCE
Tom Daly, Chair
AB 1429
(Chiu) - As Amended April 20, 2015
SUBJECT: Earthquake loss mitigation: grant programs
SUMMARY: Establishes a grant program for the seismic retrofit
of multi-family structures with low-income tenants.
Specifically, this bill:
1)Requires the California Earthquake Authority (CEA) to form a
joint powers authority (JPA) with the Office of Emergency
Services (OES) to develop a seismic retrofit grant program for
multi-family housing.
2)Limits grant funding from this program to structures that meet
the following requirements:
a. The structure has 5-10 dwelling units.
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b. The tenants are all low-income.
c. The structure meets eligibility requirements that
will be established by the JPA.
3)Requires the JPA to adopt regulations defining the type and
location of structures eligible for grant funding.
4)Requires the JPA to adopt regulations to establish the
criteria for determining grant amounts and commence operations
July 1, 2017.
5)Makes findings and declarations regarding earthquake
mitigation efforts and the need for residential seismic
retrofit programs.
EXISTING LAW:
1)Establishes the CEA as a publicly managed insurer to provide
residential earthquake insurance.
2)Defines residential earthquake insurance as a policy
protecting a residence with four or fewer dwelling units.
3)Requires OES to perform a variety of duties with respect to
specified emergency preparedness, mitigation, and response
activities in the state, including emergency medical services.
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4)Establishes the Earthquake Loss Mitigation Fund (mitigation
fund) as a sub-account with the CEA Fund and directs the fund
to transfer 5% of its investment earnings into the fund each
year. This fund is available to pay for research and
mitigation programs undertaken by the CEA.
5)Allows public agencies to form JPAs for the exercise of shared
powers.
FISCAL EFFECT: Undetermined
COMMENTS:
1)Purpose . The author states that he (as the former president
of the San Francisco Board of Supervisors) helped lead the
City's efforts to prepare for and mitigate the damage from
earthquakes. However, only 12% of California homeowners have
earthquake insurance, and there are between 1.2 to 1.6 million
pre-1940s homes with so called "cripple walls," and homes on
hillsides, and those with living space over garages that are
at serious risk in even a minor quake, let alone a major one.
California has an existing seismic mitigation incentive
program called Earthquake Brace + Bolt (EBB), which is
administered by the California Residential Mitigation Program,
but it is limited to only 650 homes in the Bay Area, LA County
and Napa. The goal of this legislation is to expand on Brace
+ Bolt and create a statewide earthquake retrofit program to
cover the tens of thousands of small multi-family residential
structures that need retrofitting.
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2)Brace + Bolt . The EBB program was created by the California
Residential Mitigation Program, which is a joint power
authority between the CEA and the OES. The EBB was developed
to help homeowners lessen the potential for damage to their
houses during an earthquake. A residential seismic retrofit
strengthens an existing house, making it more resistant to
earthquake activity such as ground shaking and soil failure,
by bolting the house to its foundation and adding bracing
around the perimeter of the crawl space. The EBB program
provides homeowners up to $3,000 to strengthen their
foundation and lessen the potential for earthquake damage. A
typical retrofit may cost between $2,000 and $10,000 depending
upon the location, the size of the house, and the amount of
work involved. The bill would require the JPA to develop the
program requirements for small, multi-family residential
structures along the lines of the existing EBB program, but
the requirements for these larger structures are significantly
different and more costly than those for typical single family
housing units.
3)California Earthquake Authority . The CEA was formed through
legislation in 1995 and 1996 to address an
insurance-availability crisis that followed the 1994
Northridge earthquake. After that earthquake, many homeowners
found it difficult or impossible to find basic homeowner's
insurance. Many others were faced with the prospect of having
their homeowners' insurance non-renewed as insurance companies
tried to shed their exposure to earthquake risk. Because
state law requires insurers to offer earthquake insurance to
their applicants and holders of residential policies, the
insurers' retreat from the California market resulted in an
availability crisis for both homeowners and earthquake
insurance. The Department of Insurance reported in the summer
of 1996, at the height of the crisis, that 95 percent of the
homeowners' insurance market had either stopped, or severely
restricted, sales of new homeowners' policies. After the CEA
began operations in December 1996, the California homeowners'
insurance market recovered quickly. A Department of Insurance
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report noted that at the peak of the availability crisis, 82
insurers had restricted the sale of new homeowners' insurance
policies. By October 1997, only three insurers were
restricting the sale of new policies. Since that time, the
requirement to offer earthquake insurance has not been a
factor in restricting the availability of homeowners'
insurance.
REGISTERED SUPPORT / OPPOSITION:
Support
Department of Insurance (sponsor)
California Apartment Association
United Policyholders
Opposition
None received
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Analysis Prepared by:Paul Riches / INS. / (916) 319-2086