Earthquake Quarterly - Winter 1996


This newsletter is a production of the Western States Seismic Policy Council
121 Second Street, 4th Floor San Francisco, California 94105
415/974-6422 fax 415/974-1747
e-mail: wsspc@wsspc.org
web address: http://www.wsspc.org

Steven Ganz, Executive Director
Andrea James, Administrative Assistant

Newsletter Subscription Form: If you are interested in continuing to receive this free newsletter, fill out this section, copy it and send it to the WSSPC office. Name: ______________________________ e-mail: ____________________________ Position: ____________________________ Agency/Company: ______________________ Address: __________________________ City: ____________ State: ____ Zip: ______ Telephone: _________________________ Fax: ___________ Web address: _____________ Mail to: 121 Second Street, 4th Floor San Francisco California 94105 or fax it to: (415) 974-1747 or e-mail us at: wsspc@wsspc.org

CALIFORNIA EARTHQUAKE AUTHORITY

In October of 1995, Governor Wilson signed Assembly Bill 13, laying the foundation for the California Earthquake Authority (CEA). Insurance Commissioner Chuck Quackenbush was thereby granted the authority to initiate the CEA and report back to the State Legislature for its final approval.

The purpose of the CEA is to create a viable solution to California's homeowners' insurance crisis. The current fear is that in the event of another major earthquake in California, carriers will become insolvent, resulting in a nationwide insurance shortage. The premise behind the CEA is to pool earthquake insurance resources together to prevent the likelihood of this insolvency.

The CEA consist of the following The first $1 billion in claims will be financed by a non-refundable cash contribution from insurers based on their market shares. The next $3 billion in claims will be financed by commitments from insurers based on their market shares The next $2 billion in claims will be covered by reinsurance. The next $1 billion in claims will be financed by state debt, retired by assessments on earthquake insurance policyholders. The next $1.5 billion in claims will be financed by capital raised from investors. The next $2 billion in claims will be financed by commitments from insurers based on their market share.

Since its signing, Quackenbush has stated that most of the funds required for its implementation have been committed. E.W. Blanch Company was selected to lead a consortium of brokers to cover the worldwide reinsurance marketplace. This consortium has secured more than $1.6 billion in coverage in terms that are more favorable than originally predicted. An underwriting team headed by Morgan Stanley, working with the Treasurers Trust Services Division, has created plans of finance for the $1.5 billion in risk transfer securities and the $1 billion in debt financing. These securities can not be sold until the CEA begins operating, however; everything is in place to enter the capital market this spring.

Lastly, the CEA has been advised to obtain a line of credit from a major bank as the debt financing layer. If a major earthquake occurs, the option will then exist to activate the $1 billion loan or issue tax-exempt revenue bonds. One of the three additional demands beyond financing that is necessary for the implementation of the CEA has nearly been met. At least 75% of the companies representing the residential earthquake insurance market must agree to participate in the CEA.

At this time, carriers representing more than 70% of the market indicated their intention to participate in the program. At this time the Commissioner's office must wait on the decision of the IRS. Authorization of the CEA is contingent on the IRS concurring with the exempt status of the reserve fund. Lastly, the California Legislature must give its final approval to create this earthquake authority.

Unfortunately, problems still exist that require further probing before the CEA can take effect. Should an earthquake occur in the early stages of the CEA the result may be a "funding gap" in the debt financing layer. A solution must be developed now to prevent this instability. A problem also exists with the small domestic carriers who represent less than 1.5% of the homeowners market. Though they are anxious to participate in the CEA, its assessment may wipe out their companies. While Quackenbush awaits the IRS ruling and final legislative approval, many homeowners are in a difficult situation. Most insurance companies are not writing new policies in California and many more homeowners may lose their coverage. Many insurance companies are waiting for the results of the CEA before issuing new "mini-policies". In closing, Quackenbush stresses that it is imperative that the Legislature make a rapid decision on the CEA or the creation of another plan to help bring back a healthy, competitive insurance market.

Back to the Table of Contents

WSSPC Focus on Earthquake Information Providers
The Earthquake Engineering Research Center (EERC)

The Earthquake Engineering Research Center (EERC) is an organized unit of the University of California at Berkeley dedicated to research, education, and dissemination of technical information in earthquake engineering. The Center was founded in 1967 and continues today as a world focal point for activities in the field of earthquake hazard mitigation. The Center features a research team comprising faculty, visiting scholars, students, and professional staff with expertise in many disciplines.

Test facilities, computer facilities, the EERC Library, and technical reference services are operated by the Center and are available to the public. Research personnel offer expertise in a broad range of specializations, including seismology, seismic strong ground motion, coastal engineering and wave mechanics, geotechnical engineering, structural engineering, mechanical and control systems, architecture, and public policy.

EERC provides service-to-industry testing and research for independent clients when such services are not obtainable from privately owned test laboratories in the United States. Service-to-industry clients may arrange to use research personnel from any source, including the faculty of any institution, to conduct testing or research within the Center's facilities.

EERC Research Facilities

EERC affords access to one of the finest and most extensive earthquake engineering research facilities in the world. EERC encourages use of the facilities by industry and by researchers from other institutions.

• The Earthquake Simulator Laboratory - The centerpiece of EERC research facilities is the 20 ft by 20 ft shaking table. A digital controller is capable of reproducing a wide range of recorded or simulated earthquake motions.
• Small Shake Table - The table measures 4 ft by 4.5 ft in plan and allows motion in one horizontal direction
• Full-Scale Isolation Bearing Test Machine - This test equipment enables tests to be carried out on full-scale and reduced-scale structural isolation components.
• Large Reaction Frame - Mounted on a 60 ft by 20 ft structural test bed, the frame is 34 ft high and capable of lateral loads of 1 million lb.
• In-Plane Test Frame - This test frame can provide a 110,000-lb. dynamic horizontal load uniformly along the top edge of a test specimen while restraining the bottom edge.
• Four-Million-Pound-Capacity Universal Testing Machine - A servo-controlled Southwark-Emery universal testing machine with load capacities of 4-million-lb. compression and 3-million-lb. tension enables testing of specimens up to 33 ft tall.
• Structural Engineering and Materials Laboratories - The Department of Civil Engineering provides extensive laboratories for structural engineering and materials testing on the Berkeley campus.

National Information Service for Earthquake Engineering (NISEE)
The goal of the NISEE is to collect, enhance, and disseminate earthquake engineering information to a worldwide audience of earthquake engineers, researchers, seismologists, geoscientists, architects, political scientists, economists, public policy makes, the hazards mitigation community, and the general public.

Some of the products and services provided through NISEE include:

• EERC Reports - Results of EERC research pro-grams are published in the EERC Reports series.
• EERC/NISEE News - News provides up-to-date information on NISEE activities, library acquisitions, recently published reports, and computer programs.
• On-line Database - Earthquake Engineering Abstracts in an on-line database devoted to coverage of the world's literature in earthquake engineering and earthquake hazard mitigation.
• Abstract Journal in Earthquake Engineering - The Abstract Journal is the printed form of the on-line database.
• EERC Library - This Library contains more than 30,000 books, research reports, technical journals, conference proceedings, monographs, maps, and audiovisual materials on earthquake hazards and mitigation.
• Computer Applications - NISEE distributes computer software in support of earthquake engineering and related research. Source codes with sample problems and user documentation are provided in most cases.
• Photograph Library - In addition to an extensive library of slides housed at the EERC Library, EERC has uploaded hundreds of slides on their world wide web site for public use.

You can reach EERC/NISEE by telephone: (510) 231-9554, by fax: (510) 231-9471 , by e-mail: admin@eerc.berkeley.edu or visit their world wide web site: http://nisee.ce.berkeley.edu This is first of a series of articles which will focus on earthquake information providers throughout the country.

Back to the Table of Contents

THE ART OF READINESS

The Art of Readiness -- a report based on a recent survey of 50 States and one territory -- summarizes the findings regarding State spending for emergency events between 1992 and 1994. This article about the increasing role of State governments in emergency management was written by Sandra Cabot, Executive Director of the National Emergency Management Association (NEMA), and published in State Government News (January 1996).

States face increased pressure for more developed emergency management systems as a result of the decreasing willingness of the federal government to finance emergency relief efforts. According to Cabot, States are learning that the key to effective disaster management is preparedness and planning. To improve life and property saving efforts, it is necessary to "identify risks, develop and enforce measures to reduce disaster effects, plan evacuation routes, exercise to develop and test readiness levels, train public officials and educate individuals about emergencies."

The NEMA survey showed total State spending increased 37.5% from fiscal 1992 to fiscal 1994. While pre-disaster spending rose 9%, post-disaster spending soared by more than 56%. The study showed that in 1994 the total State spending was $1.6 billion averaging $31.8 million per state or $8.70 per person. There are two reasons for the significant jump in post disaster spending, states Cabot.

First, there was from 1992 to 1994 an increase in the number and severity of emergencies. Secondly, because of pressure at the federal level to balance the budget and control the deficit, funds outside of the limited Disaster Relief Fund are now difficult to obtain. The budget crunch has led to fewer disasters being declared federal emergencies and thus a greater reliance on State funds. When an emergency occurs, it is the responsibility of the local government until it exceeds that government's capacity to provide relief. At that point it becomes the responsibility of the governor to initiate the State's response. If the disaster relief effort extends beyond State capabilities, the President can declare a National Emergency, allowing federal assistance. The current trend, caused by fiscal limitations on a federal level, is fewer declarations and a larger financial burden resting with the States.

Mitigation is the key to maintaining cost, and as States continue seeking solutions, this will be the focal point. States are now creating methods to appropriate and manage disaster assistance funding, writes Cabot. Currently, the most popular model has legislatures appropriating funds for specific incidents after each major disaster occurs. Another commonly used method involves establishing a separate disaster fund with funds appropriated on an as needed basis to keep sufficient monies available at all times. While federal, state, and local governments continue working together, more mutual aid agreements between jurisdictions and public-private partnerships will emerge to decrease the States' rising burden.

For more information or to obtain a copy of this report, contact Sandra Cabot at the National Emergency Managers Association (NEMA) at (606) 646-8000.

Back to the Table of Contents

WSSPC/U.S. DOT Monograph No. 1

During 1995, the U.S. Department of Transportation's Office of Emergency Transportation contracted with WSSPC to produce a regional monograph that addresses seismic threats in the western U.S. and their impacts to the national transportation infrastructure. The task was undertaken by the '95 support office, and valuable contributions were made from member state representatives and directors.

The final document is completed and incorporates the reviews provided following distribution of a draft in November. The monograph addresses the seismic threat through an assessment of the seismogenic zones impacting the western U.S., including: the San Andreas fault system; Cascadia and Aleutian subduction zones; Basin and Range Province; Rio Grande Rift; Intermountain Seismic Belt, Hawaiian Volcanic Chain; and, the Marianas Subduction Zone. The document compiles available information on the history of the threat, damage estimates, and lessons learned from each region. A summary of the threat to transportation infrastructure is provided for each member state. Finally, a review of the status of the mitigation programs within each member state is presented.

The well-illustrated 65 page monograph is included in the WSSPC '95 annual report to be distributed to attendees of the '95 Flagstaff Conference. In addition, an interactive computer version was produced by the support office that includes graphical interfaces between figures and text. The interactive version may be obtained by downloading wsspc95.zip (no longer available) and following instructions provided at the WSSPC World-Wide-Web site. The website also contains directions for viewing a short Director movie of the popular figure illustrating Pacific Northwest historical earthquakes published by Atwater and others (1995). A limited number of versions on diskette were prepared with an easy-to-follow setup program that installs the interactive monograph on your IBM-Windows system with the necessary icons. These may be obtained from the office of the WSSPC Executive Director.

By preparation of this document WSSPC helped to fill a void in the availability of regional non-technical documents for the western U.S. This is clear from the response among users. Several presentations were requested of the sup

port office by professionals involved in the mitigation of earthquake hazards on a regional level. Presentations of the results of the monograph were provided in November '95 for the U.S. Coast Guard's Flagship Admirals' Conference in Alameda, California; the Emergency Support Function (ESF-1) workshop in Seattle last December; and the 1996 Annual Conference of the U.S. DOT Office of Emergency Transportation in Phoenix this month. The next logical step, as recommended in the monograph, is to produce a series that focuses upon the various seismogenic zones that affect our member states.

Back to the Table of Contents

Spotlight on National Legislation

H.R. 1856 - Natural Disaster Protection Partnership Act of 1995

On Capitol Hill legislation awaits approval of the Congress which would amend the Robert T. Stafford Disaster Relief and Emergency Assistance Act. Approval of the Act would:

1) require a State to pay or agree to pay at least five dollars per resident, as determined by the latest official census, before such State or local government receives Federal assistance for the repair, restoration, reconstruction, or replacement of public facilities damaged or destroyed by a major disaster in the State; and
2) revise the formula used to determine the Federal share of such assistance as well as the Federal share for debris and wreckage removal from publicly and privately owned lands resulting from such disaster. The Act also adds provisions concerning disaster mitigation.

Requires the Director of the Federal Emergency Management Agency to:

A) establish and carry out natural disaster hazard mitigation programs that support natural disaster research, technology, and education;
B) to enter into an arrangement with the National Academy of Sciences to study and report to the Congress on the feasibility of establishing:

(1) national minimum building construction standards for residential and commercial building construction; and
(2) standards for the training and licensing of home inspectors and for using such inspections as a means of promoting mitigation for residential property; and

C) to define which States should be classified as natural disaster-prone for purposes of the Act. Gives the effect of law to a specified executive order relating to earthquake design and construction standards for federally leased, assisted, or regulated buildings. Requires each natural disaster-prone State to either:

(1) adopt multihazard building and safety codes for all new and substantially modified building construction in that State; or
(2) certify that the State's local communities have adopted and are enforcing building codes which meet the appropriate minimum mitigation requirements of that State.

Requires each State designated as flood-prone to either adopt relevant flood protection standards or certify that its flood-prone local communities are in compliance with appropriate State flood protection standards.

Requires each natural disaster-prone State to either develop a multihazard mitigation plan or designate an existing plan which includes specified compliance and response requirements.

Outlines provisions concerning State compliance with the establishment, adoption, and implementation of appropriate mitigation plans.

Provides penalties for noncompliance.

Establishes the Natural Disaster Insurance Corporation as not-for-profit membership corporation to provide primary insurance coverage's and reinsurance coverage for hurricanes, earthquakes, volcanic eruptions, and tsunamis. Requires the Corporation's Board of Directors (Board) to:

(1) develop a plan of operation describing the Corporation's administration and the provision of the insurance coverages it provides; and
(2) develop and adjust, when necessary, actuarially sound rates for such coverages. Encourages each private insurer that participates in the Natural Disaster Insurance Corporation to take mitigation measures into account in setting rates and deductibles for its property insurance.

Establishes an independent Natural Disaster Insurance Board of Actuaries (Independent Board) to review and approve such plan and rates.

Requires the Board to file with each State insurance regulator information copies of the initial material and future revisions to its insurance rates, terms, or conditions.

Requires the Corporation to establish and maintain a:

(1) primary insurance coverage trust account to pay qualifying claims and loss adjustments expenses to private insurers acting as service providers of the primary insurance coverages; and
(2) reinsurance coverage trust account to pay qualifying claims to private insurers which purchased such coverage.

Outlines provisions concerning the Corporation's use of funds from other accounts and funds to pay for losses in excess of trust account funds or funds raised by issuing obligations in the private market (requiring repayment of funds borrowed from such accounts or funds).

Requires the trust accounts to be kept separate.

Prohibits:

(1) the borrowing of monies between such accounts; and
(2) the authorization or appropriation of Federal funds for Corporation activities.

Requires the Corporation to:

(1) issue primary insurance coverages that insure against physical damages and losses to residential property, including debris removal, additional living expenses incurred as a result of direct damage to such property, and ordinance and law coverages, resulting from the natural disasters enumerated in this Act that meet specified terms and conditions; and
(2) make, under certain conditions, excess reinsurance coverage available to private insurers and State insurance pools for residential losses (including quota-share amounts retained by the private insurers under this Act not already insured by the Corporation under the primary insurance coverage policies) and commercial losses that are proximately caused by specified natural disaster perils.


Back to the Table of Contents