(a) (1) Notwithstanding the prior approval requirement of Section 10089.10, the authority shall issue and sell investment grade revenue bonds or secure other debt financing of the authority, or both, in amounts determined by the board pursuant to Section 10089.32, but not to exceed one billion dollars ($1,000,000,000) plus costs of issuance and sale of those revenue bonds, costs of securing that debt financing, and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt, if claims and claim expenses incurred by the authority from an earthquake event exhaust the total of the following:
(A) The authority’s available capital.
(B) The maximum amount of all contributions of initial operating capital made by participating insurers pursuant to Section 10089.15, and assessments levied and paid pursuant to Section 10089.23.
(C) All reinsurance actually available and under contract to the authority.
(D) All risk transfer provided and any other capital committed through capital market contracts that is actually under contract to the authority from private capital markets.
(2) The Treasurer shall act as agent for sale of the revenue bonds described in paragraph (1), and shall make available the net proceeds of those revenue bonds as funding for the authority. Failure of the authority to sell those revenue bonds or obtain that debt financing for any reason shall not obligate the State of California to provide or arrange replacement funding for the authority. The Treasurer may sell revenue bonds for the purpose of refunding the revenue bonds or other debt financing when authorized to do so by the board, and the surcharge authorized by this section may be used to repay that refunding, plus costs of issuance and sale of those revenue bonds or other debt financing being refunded, and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt being refunded.
(b) (1) In the event of a revenue bond sale or debt financing arrangement pursuant to this section, the authority shall have the power to surcharge annually all authority policies to secure funds, which the authority may use solely to repay the bonded indebtedness or other debt, plus costs of issuance and sale of those revenue bonds or other debt, and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt. Notwithstanding paragraph (3) of subdivision (a) of Section 10089.23, the total net surcharge collected shall not exceed one billion dollars ($1,000,000,000), plus costs of issuance and sale of those revenue bonds or other debt and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt. The surcharge on an authority policy shall not exceed 20 percent of the annual authority residential earthquake insurance policy premium in any one year. A surcharge levied and collected pursuant to this section shall not be considered revenue, notwithstanding subdivision (o) of Section 10089.5, including for purposes of the calculation of rates filed with the commissioner pursuant to subdivision (e) of Section 10089.40. A surcharge levied and collected pursuant to this section also shall not be considered basic residential earthquake premium for any purpose, including the calculation of producer commission.
(2) If a policy issued by the authority includes a premium surcharge pursuant to this subdivision, the participating insurer shall provide the insured a notice in a stand-alone document stating that the policyholder may cancel or nonrenew the earthquake policy. The notice shall specify that cancellation or nonrenewal of the earthquake policy will not affect the underlying residential property insurance policy. The statement shall be provided with the premium billing and shall include the following statement in 14-point boldface type:
NOTICE OF SURCHARGE ON CEA EARTHQUAKE INSURANCE POLICY AND RIGHT TO CANCEL
THE CEA IS IMPOSING A SURCHARGE ON THE PREMIUM OF ALL CEA EARTHQUAKE INSURANCE POLICIES. You may choose to renew, to cancel, or not to renew (“nonrenew”) your CEA earthquake insurance policy. If you choose to cancel or nonrenew your CEA earthquake insurance policy, your CEA earthquake insurance policy will be canceled and that cancellation will have no effect on your policy of residential property insurance. If you fail to cancel or to nonrenew your CEA earthquake insurance policy, and if you also fail to pay the CEA earthquake insurance policy premium and surcharge by the payment deadline, both your CEA earthquake insurance policy and your policy of residential property insurance will be canceled. IF YOU WANT EARTHQUAKE INSURANCE PROVIDED BY THE CEA, YOU MUST PAY THE PREMIUM FOR THE CEA EARTHQUAKE INSURANCE POLICY AND THE SURCHARGE.
(c) The total amount of indebtedness and policy surcharges authorized under this section shall not exceed one billion dollars ($1,000,000,000) plus costs of issuance and sale of those revenue bonds or other debt and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt, regardless of the frequency or severity of earthquake losses incurred after the creation of the authority. Once the authority has levied policy surcharges in a total amount of one billion dollars ($1,000,000,000) plus costs of issuance and sale of those revenue bonds or securing other debt financing and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt financing, the authority’s power to surcharge authority policies shall cease and the authority shall be prohibited from levying additional surcharges pursuant to this section.
(d) Consistent with Section 676, the authority shall cancel the policy of basic residential earthquake insurance if the policyholder fails to pay the earthquake policy surcharge authorized by the authority, and the insurer shall cancel the policy of residential property insurance if the policyholder fails to pay the policy surcharge authorized by the authority.
(Amended by Stats. 2018, Ch. 828, Sec. 3. (AB 2927) Effective January 1, 2019.)