California Wildfire Fund Governing Board Meeting Wednesday (CEA – Interim Administrator) August 7, 2019 Califor orni nia a Depa partment tment of Food od and d Agricultur iculture Auditorium, Room 131 1220 N Street Sacramento, California 95814 1:00 p.m. 2
ITEM 1 Meeting Call • Governor • Treasurer to Order • Insurance Commissioner • Speaker of the Assembly Chair of the Senate Rules Committee • Establishment of a quorum CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 3
ITEM 2 Executive Interim Administrator of California Wildfire Fund Report CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 4
ITEM 2 • Executive Report AB 1054: Legislative Intent AB 1054 “It is the intent of the Legislature to provide a mechanism that allows electrical corporations that are safe actors to guard against impairment of their ability to provide safe and reliable service because of the financial effects of wildfires in their service territories using mechanisms that are more cost effective than traditional insurance, to the direct benefit of ratepayers and prudent electrical corporations.” CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 5
ITEM 2 • Executive Report California Wildfire Fund Governance Structure Cali lifornia rnia Cali lifornia rnia Catastr trop ophe Earthqua quake e Authority rity Respons ponse e Council cil Voting Members (3) Voting Members (9) California • Governor • Governor • Insurance Commissioner • Insurance Commissioner CEA Catastrophe • Treasurer • Treasurer Governing Board Response Sec. of Natural Resources • Non-Voting Members (2) • 3 Appointed by Governor Council • 1 Appointed by Senate Rules • Assembly Speaker • 1 Appointed by Assembly Speaker • Senate Rules Chair Oversight solely with regard to support services provided to the California Wildfire Fund Administrator Appointed by California Catastrophe California Response Council California Wildfire Earthquake Fund Administrator Authority Services Agreement (TBD) CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 6
ITEM 2 • Executive Report Interim erim Calif ifornia ornia Wild ldfire re Fund Gove overna nance nce St Structure ucture Gov. Code § 8899.70 (d) “Until a majority of the council is appointed, the governing CEA board of the California Governing Board Earthquake Authority shall assume the authorities and duties of the council.” Ins. Code § 10089.6 (a) (2) “The authority shall be California authorized to exercise the Earthquake powers of the California Authority Wildfire Fund Administrator… until the appointment of the administrator by the council.” CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 7
ITEM 2 • Executive Report California Wildfire Fund Ratep epaye yers s $1 $10. 0.5 5 B Util ilit ities s $1 $10. 0.5 5 B + • Initial SMIF Loan: $2 B • Initial Contribution: $7.5 B • Annual Revenue Stream from DWR Surcharge: $900 M • Annual Contribution: $300 M ($3 B total) SDG&E (4.3%) • By 9/10/19 • Following Safety Initial: $323 M Plan approval Annual: $12.9 M SMIF $2 B Loan Calif lifor ornia ia Wildf ldfir ire e Fund SoCal Edison (31.5%) • By 9/10/19 • Following Safety Initial: $2.363 B 1 Plan approval Annual: $94.5 M $2 $21 1 B DWR Surcharge 2 • Upon emerging PG&E (64.2%) $900 M/Year from bankruptcy Initial: $4.815 B • Following Safety Annual: $192.6 M Repayment of SMIF loan Plan approval 1 2 Revenue stream into California Wildfire Fund The contribution numbers in this chart are approximate figures for illustration purposes only. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 8
ITEM 2 • Executive Report Recommended Action Items Agenda nda Item m 3: Calif ifor orni nia Wildfire ire Fund d Set etup p and Capi pita talizati ization a) Approve Custodial Banking and Demand Deposit Account agreements b) Approve Asset-Management Services agreements c) Approve Investment Consulting agreement d) Authorize Procurement of additional Asset Managers e) Approve Investment Policies for the California Wildfire Fund f) Authorize Development and Implementation of cost allocation methodology Agenda nda Item m 4: Calif ifor orni nia Wildfire ire Fund d Risk k Transf sfer er Issues sues a) Approve procurement of a risk-transfer intermediary b) Approve risk-transfer guidelines c) Authorize CEA staff to execute risk-transfer contracts CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 9
ITEM 3 a) Custodial Banking and Demand Deposit Accounts b) Asset-Management Services California Wildfire Fund c) Investment Consulting Setup and d) Additional Asset Managers Capitalization e) Investment Policies f) Cost Allocation Methodology CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 10
RESOLUTION 3(a) • Custodial Banking and Demand Deposit Accounts Recommended Action: Approve, adopt and ratify agreement by CEA, as Interim Administrator of and on behalf of the California Wildfire Fund, and U.S. Bank, National Association (USB) for Custodial Banking and Demand Deposit Accounts. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 11
RESOLUTION 3(b) • Asset-Management Services Recommended Action: Approve, agreements by CEA, as Interim Administrator of and on behalf of the California Wildfire Fund, for Asset Management services from: Eaton Vance Management • • PFM Asset Management RBC Global Asset Management • • Smith Graham & Co. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 12
RESOLUTION 3(c) • Investment Consulting Recommended Action: Approve, adopt and ratify agreement by CEA, as Interim Administrator of and on behalf of the California Wildfire Fund, for Investment Consulting services to be preformed by Raymond James & Associates. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 13
RESOLUTION 3(d) • Additional Asset Managers Recommended Action: Authorize CEA to undertake expediated procurement and engagement of additional asset managers for the California Wildfire Fund in anticipation of additional capitalization. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 14
RESOLUTION 3(e) • Investment Policies Recommended Action: Approve and adopt proposed California Wildfire Fund investment policies. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 15
RESOLUTION 3(f) • Cost Allocation Methodology Recommended Action: Authorizing CEA staff to develop, document and implement a cost allocation methodology to allocate all administration expenses arising from or related to the California Wildfire Fund for payment by the California Wildfire Fund. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 16
ITEM 4 California a) Risk transfer intermediary Wildfire Fund b) Risk transfer guidelines Risk Transfer c) Risk transfer contracts CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 17
RESOLUTION 4(a) • California Wildfire Fund Risk Transfer Intermediary Services Recommended Action: Authorize CEA, as Interim Administrator of the California Wildfire Fund, to contract for reinsurance intermediary and advisory services. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 18
RESOLUTION 4(b) • California Wildfire Fund Risk Transfer Risk Transfer Guidelines Recommended Action: Approve and adopt Risk Transfer Guidelines for the California Wildfire Fund. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 19
RESOLUTION 4(c) • California Wildfire Fund Risk Transfer Risk Transfer Purchase Recommended Action: Authorize CEA, as Interim Administrator of the California Wildfire Fund, to purchase insurance, reinsurance and other forms of risk transfer to protect the California Wildfire Fund and increase the durability and claim-paying capacity of the California Wildfire Fund. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 20
ITEM 5 Plan of Development of a plan of operations Operations for the California Wildfire Fund CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 21
ITEM 5 • Plan of Operations Recommended Action: No action required – discussion only CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 22
ITEM 6 Public Public comment on matters that do not appear on this agenda and requests by the public that Comment those matters be placed on a future agenda. CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 23
ITEM 7 Adjournment Thank you for attending this meeting of the California Earthquake Authority Governing Board. Agend enda Inform rmat ation ion Media dia Cont ntact act Gener eral al Infor orma matio tion Shann nnon on McEue Euen Tom m We Welsh Chris is Nance ce (916) 661-5527 (Direct) (916) 799-5558 (Direct) (916) 661-5430 (Direct) cnance@calquake.com Toll free (877) 797-4300 Toll free (877) 797-4300 CEA · Wildfire Fund Governing Board Meeting · August 7, 2019 24
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