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As well as the California State Association of Counties' property insurance net functioned during October's Southern California wildfires, the risks in the state are still immense. Sooner or later, an event or a combination of events will blow the CSAC's insurance towers to smithereens, according to Riverside County Assistant County Executive Ron Komers.

Riverside County, which is adding population at the phenomenal rate of 65,000 people per year and now is home to nearly 2 million people, already has billions of dollars' worth of property/casualty exposure. And it sits atop the San Andreas Fault. On a sunny October day in his Lemon Street office, Komers turned and pointed at the county hospital and jail facilities in Riverside, all of which could be shut down by a serious temblor.

"Is our risk diversified enough that the pool is not going to have enough money to cover the risk? I think that's something we need to be concerned about," said Komers, who oversees a human resources department that houses county risk management.

Laurie Milhiser, the director of risk management for neighboring San Bernardino County to the north, agreed. "We could be the second hit ourselves," said Milhiser, as she fielded questions in her office after Southern California's October fires had largely been controlled. "We're sitting on an earthquake fault here, and so we could have all the fire followed by the ground shakes and there we are."

Because of the vast resources of California counties and school districts that use the state's Excess Insurance Authority, these municipal bodies pay property insurance rates that are less than one-tenth those in the private market.

According to Komers, Riverside barely escaped being overwhelmed by the October wildfires that were moving toward it from the neighboring counties of San Bernardino, Orange and San Diego. Riverside and San Bernardino are also served by four freeways, which could all be brought down in the same earthquake.

Mike Fleming, the general manager of CSAC's Excess Insurance Authority, said the state's seven property insurance towers each contain $75 million in earthquake coverage, with an additional $125 million laid on top, for a combined total of $200 million in coverage for each tower.

He said earthquake coverage is optional. Some members take it, others don't. "The entire program is very flexible from a member standpoint," Fleming said.

The key to surviving whatever the Golden State may dish out in the coming years, according to Komers and Milhiser, is sound fiscal management.

California counties that manage their money well enough to retain hundreds of millions in self-insurance, as Riverside does, have a far better chance of getting through a big earthquake.

For now, those who pay their property insurance and other premiums into CSAC's pools say they like where they are. "I know that if I took our loss ratios in general liability and medical malpractice out on the street, I'm going to get killed," said Jim Sessions, the risk manager for Riverside County.

December 1, 2007

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