(a) (1) There is hereby created the California Earthquake Authority, which shall be administered and governed by the governing board described in Section 10089.7 under the authority of the commissioner and overseen by the California Catastrophe Response Council solely with regard to any administrative or support services the authority may provide to, or for the benefit of, the Wildfire Fund created pursuant to Section 3284 of the Public Utilities Code or the Wildfire Fund Administrator appointed pursuant to Section 8899.72 of the Government Code. All other businesses or activities of the authority unrelated to the Wildfire Fund shall be governed solely by the board. The authority shall have the powers conferred by this chapter. The authority shall be authorized to transact insurance in this state as necessary to sell policies of basic residential earthquake insurance in the manner set forth in Sections 10089.26, 10089.27, and 10089.28. The authority shall have no authority to transact any other type of insurance business.

(2) The authority shall be authorized to exercise the powers of the Wildfire Fund Administrator as provided in Section 3281 of the Public Utilities Code until the appointment of the administrator by the council.

(b) (1) The investments of the authority shall be limited to those securities eligible under Section 16430 of the Government Code.

(2) The rights, obligations, and duties owed by the authority to its insureds, beneficiaries of insureds, and applicants for insurance shall be the same as the rights, obligations, and duties owed by insurers to its insureds, beneficiaries of insureds, and applicants for insurance under common law, regulations, and statutes. The authority shall be liable to its insureds, beneficiaries of insureds, and applicants for insurance as an insurer is liable to its insureds, beneficiaries of insureds, and applicants for insurance under common law, regulations, and statutes.

(c) The operating expenses of the authority shall be capped at not more than 6 percent of the premium income received by the authority. The funds shall be available to pay any advocacy fees awarded in a proceeding under subdivision (c) of Section 10089.11.

(d) For purposes of this section, the term “operating expenses of the authority” excludes solely the following:

(1) The costs of and transaction expenses associated with risk-transfer purchases, including the purchase of reinsurance and with capital-market contracts.

(2) The expense of securing and repaying bonds.

(3) The cost of repayment of bonds guaranteed, insured, or otherwise backed by any department or agency of the United States or of this state, or by any private entity.

(4) Payments to third parties for all of the following services provided to the authority:

(A) Investment.

(B) Loss-modeling.

(C) Legal services.

(5) Costs associated with the authority’s efforts to acquaint the public with and market authority products, promote earthquake preparedness, and earthquake-loss mitigation under the authority’s duly adopted strategic plan.

(6) Producer compensation.

(7) Participating insurer fees and reimbursement amounts arising under written contracts.

(8) Amounts paid by the authority to support research in seismic science and seismic engineering.

(9) Loans, grants, and expenses to support and maintain the authority’s earthquake loss-mitigation goals and programs, whether conducted by the authority alone or in collaboration with or by other persons.

(10) The costs of and loss-adjustment expenses associated with adjusting and paying policyholder claims for earthquake losses that are incurred by the authority under its earthquake insurance policies, including all costs and expenses associated with claim-related litigation, provided that all of those costs and expenses shall be reported to the Legislature in the manner required by subdivision (e) of Section 10089.13.

(11) Any cost incurred to provide administrative services and other support to or for the benefit of the Wildfire Fund created pursuant to Section 3284 of the Public Utilities Code, which cost shall be borne by the Wildfire Fund.

(e) The board may authorize the authority to contract with the Wildfire Fund created under Section 3284 of the Public Utilities Code to provide services and other support as the Wildfire Fund may require.

(Amended by Stats. 2019, Ch. 396, Sec. 10. (AB 1513) Effective January 1, 2020.)