June 30, Glenn Pomeroy Chief Executive Officer Chris Nance Director of Communications and External Affairs

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2010 Financial Structure Claims-Paying Capacity: 1-in-545 Years 3 Total: $9.8B Reinsurance $3.6B CEA Capital $0.3B $3.1B $2.8B Revenue Bonds Participating Insurer Assessments New Policies sold March: 5,497 April: 6,996 May: 1,545 Total Policies:816,410 as of 6/24/10

Only 12% of residents with homeowners insurance have earthquake coverage. coverage. Insured Uninsured 4

High-priced premium 5 High-percentage deductible

Spent on reinsurance $2.5 billion Capital $2.4 billion *Expenses $1.1 billion Reinsurance claims paid: $250, : Total policyholder premiums $6 billion Reinsurance Costs $2.5 billion 6 * Major Expense Categories Agent Commissions Debt Financing Participating Insurer Fees CEA Operations

Reduce proportion of overall expenses made up by reinsurance costs. Pass on savings by reducing CEA premiums and deductibles, to prompt increase in take up rates. Increase the number of Californians protected by earthquake insurance. Maintain CEA’s financial strength. Reduce the cost to the federal government and taxpayers in the event of a major earthquake. 7

Catastrophe Obligation Guarantee Act (COGA): Enables CEA to reduce policyholder costs and deductibles Allows growth of CEA by reducing dependence on reinsurance Commits federal guarantee for post-event borrowing in the private-debt market Retains CEA’s financial strength Reduces costs of recovery for federal government 8

Louisiana: Charlie Melancon 9 S.886: H.R.2555: H.R.4014: Catastrophe Obligation Guarantee Act Bill Nelson (FL), Dianne Feinstein, and Barbara Boxer (CA) Homeowners’ Defense Act of 2009 – Title II Catastrophe Obligation Guarantee Act of 2009 California: Loretta Sanchez, John Campbell, Judy Chu, Jim Costa, Sam Farr, John Garamendi, Zoe Lofgren, Grace Napolitano, Linda Sanchez, and Adam Schiff, Lois Capps, Laura Richardson, Lucille Roybal-Allard, Jackie Speier, Michael Thompson, Lynn Woolsey,Barbara Lee, Bob Filner, Michael Honda, Susan Davis, Howard Berman, Brad Sherman Ron Klein (FL) and others Mary Landrieu (LA) Approved by House Financial Services Committee 4/27/2010

Reinsurance: COGA $10 Billion $2.64 B $.3 B $3.2 B $3.6 B Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Constitutes 2/3 of CEA expenses Requires 40% of policyholder premium Provides 1/3 of claims paying capacity 1/3 of reinsurance layer provided by one reinsurer Total $9.8 B

COGA $10 Billion Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Post-Event Borrowing Greater financial strength Significant expense reduction Reduce heavy dependence reinsurance PI attachment point 11

Double take up rate over 5 years Enhance financial strength Probability of need to borrow – less than 1% COGA FUTURE Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Post-Event Borrowing Participating Insurer Assessments Revenue Bonds Reinsurance CEA Capital Post-Event Borrowing 12

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“The penetration of earthquake insurance has been low, and the government, through disaster relief assistance, continues to serve as the predominant bearer of earthquake catastrophe risk.” – page 8 March 12,

Training + Incentives = Sales 17

 Inquiries about earthquake insurance from potential policyholders, and  Potential questions about low take-up percentages from policymakers Chile M8.8Indonesia M7.7Mexico M7.2 Haiti M7.0Japan M7.0China M6.9 Spain M6.9California M6.5Taiwan M6.4 Philippines M6.0Solomon Islands M6.0San Diego M5.7 18

March – 5,497 April – 6,996 May – 1,545 19

Consumers: Unaware of the CEA and its role – no relationship Question how the CEA would administer claims Agents / Producers: Not motivated to sell CEA policies Limited relationships with the CEA 20

Position: The CEA and its network of leading insurance providers give you, your family and community the security you can count on to recover from a major earthquake Tagline: The CEA offers you the “Strength to Rebuild” 21

Communicate consumer offer / benefit: Catastrophe product, Financially solid, and Participating insurer product service expertise 22

Provide marketing incentives: Training, Direct mail, and Paid media 23

Statistical analysis will confirm training value Future CEA marketing incentives available only for CEA-trained agents Greater efficiencies from training sessions scheduled by participating insurers 2011 marketing incentives capped at 5,000 agents 24

Three flights of direct mail, paid media Each flight offers trained agent 200 postage-paid direct-mail cards First flight offered with no obligation Second / third flight requires sale of three CEA polices before incentives available 25

CEA information materials, Three flights of paid media, and One flight of CEA policyholder outreach 26

Produces potential 15,000 new policyholders Represents potential $10 million increase in annual gross revenue Annual retention rate greater than 80 percent New policyholder acquisition costs at 14 percent of average premium Policyholder retention costs at.5 percent of average premium 27

One week of the CEA’s investment income covers additional potential exposure – $5.6 million Net income (after expenses) promotes upward movement of industry assessment layer Creates more than $1 million in commission income for agents 28

Consumers learn about CEA offer – get “Strength to Rebuild” CEA increases the take-up percentage for earthquake insurance Participating insurers reduce number of homeowner policyholders with earthquake damage who may claim to be uninformed of earthquake risk 29