The California Earthquake Authority (CEA) has tabled a staff recommendation to allow it to work with “expatriate” reinsurers, a longstanding policy that prevents the earthquake insurance fund from working with a number a formally U.S.-based companies.
“The intent of that potential change to the guidelines was to make clearer when CEA might consider working with expatriate reinsurers, as described in the board meeting materials,” said a CEA spokesperson. “However, that specific recommendation was actually removed from the meeting agenda pending further research, so CEA’s governing board did not consider it at its March 15 meeting.”
An expatriate reinsurers, as described by the CEA, is a “U.S. corporation that relocates, whether physically or solely on paper, to an offshore tax-haven location for the sole or primary purpose of reducing its US tax burden.”
The proposed language change would have allowed staff to contract with these reinsurers if certain “criteria” were met. The criteria defined in documents as when “CEA is not reasonably able to secure the desired or necessary reinsurance capacity, on terms and conditions, including price, acceptable to the CEA, without contracting with that expatriate company,” according to documents.
The spokesperson did not detail when the research would be complete or if the proposal would be resubmitted.
“The proposed and then removed board item for CEA board consideration was to make it clearer when CEA might consider working with expatriate reinsurers,” the spokesperson said, adding that the fund does currently work with several offshore reinsurers for a majority of its reinsurance program. “The reinsurers CEA currently contracts with in Bermuda and other domiciles are not expatriate reinsurers.”
The expatriate policy was first implemented when California State Treasurer Phil Angelides in the last decade as part of a program to ban investments in U.S. firms that moved headquarters offshore for tax purposes. At that time reinsurers PXRE, White Mountains Insurance and Everest Re were defined as “expatriate” companies.
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