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SB-440 Earthquake and wildfire loss mitigation.(2021-2022)

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Date Published: 02/16/2021 09:00 PM
SB440:v99#DOCUMENT


CALIFORNIA LEGISLATURE— 2021–2022 REGULAR SESSION

Senate Bill
No. 440


Introduced by Senator Dodd
(Principal coauthor: Senator Hertzberg)

February 16, 2021


An act to amend Sections 10089.5 and 10089.13 of, and to add Sections 10089.315 and 10089.316 to, the Insurance Code, and to add Chapter 4 (commencing with Section 3298) to Part 6 of Division 1 of the Public Utilities Code, relating to natural disasters, making an appropriation therefor, and declaring the urgency thereof, to take effect immediately.


LEGISLATIVE COUNSEL'S DIGEST


SB 440, as introduced, Dodd. Earthquake and wildfire loss mitigation.
(1) Existing law establishes the Wildfire Fund to pay eligible claims arising from a covered wildfire. Existing law specifies the funding sources for the Wildfire Fund, which include contributions from electrical corporations and revenues generated from a specified charge imposed on the ratepayers of an electrical corporation. Existing law creates the California Catastrophe Response Council to oversee the Wildfire Fund Administrator and the California Earthquake Authority (CEA) with regard to any administrative or support services the CEA may provide to the Wildfire Fund. Existing law requires the Wildfire Fund Administrator to carry out the duties related to the operation, management, and administration of the Wildfire Fund, as approved by the council. Under existing law, a violation of the Public Utilities Act or any order, decision, rule, direction, demand, or requirement of the commission is a crime.
This bill would require the Wildfire Fund Administrator, the Office of Emergency Services, and the Office of Energy Infrastructure Safety to create the California Wildfire Residential Loss Mitigation Program as a joint powers authority. The bill would require that program to provide mitigation against wildfire risk, including a grant program to assist qualifying owners to retrofit their structures to protect against wildfire or to create a defensible space around their structures. The bill would establish the Wildfire Loss Mitigation Fund as a continuously appropriated subaccount in the Wildfire Fund to fund the program. Because the bill would create a continuously appropriated fund, the bill would make an appropriation. The bill would require the council to annually set aside 5% or $10,000,000, whichever is less, of the Wildfire Fund’s investment income for deposit in the Wildfire Loss Mitigation Fund. Because certain of these provisions would be codified in the Public Utilities Act and would require action by the commission, a violation of which would be a crime, the bill would impose a state-mandated local program.
(2) Under existing law, the CEA is authorized to transact insurance as necessary to sell policies of basic residential earthquake insurance. Existing law establishes the California Earthquake Authority Fund, a continuously appropriated fund. Existing law requires the CEA to set aside in each calendar year, an amount equal to 5% of investment income accruing on the CEA’s invested funds, or $5,000,000, whichever is less, to fund the establishment and operation of an Earthquake Loss Mitigation Fund, which is a subaccount in the California Earthquake Authority Fund.
This bill would create the Mitigation and Contingent Capital Expense Reserve Fund within the California Earthquake Authority Fund. The bill would require the CEA to pay into the new fund an annual contingent capital expense equal to 2% of the amount of claim-paying capacity available to and actually relied upon by the authority for the preceding calendar year that is based upon and supported by the authority’s ability to impose the assessment authorized above. Under the bill, money in the fund would be periodically disbursed to the Earthquake Loss Mitigation Fund and the Wildfire Loss Mitigation Fund.
(3) Existing law establishes a capital structure for the CEA, with several sources of financing. Existing law generally makes all moneys and invested assets held in the California Earthquake Authority Fund “available capital,” which is the first source of financing used to pay earthquake claims and claim expenses. Existing law authorizes the CEA to issue and sell investment grade revenue bonds and assess participating insurance companies if claims and claim expenses paid by the CEA due to earthquake events exhaust specified sources of capital.
If claims and claim expenses paid by the CEA due to earthquake events exhaust the CEA’s existing funding sources, this bill would require the CEA to determine, and the commissioner to instruct all assessing insurers to collect, an assessment on assessable insurance policies, which include specified types of insurance policies, but exclude, among other policies, life, health, and earthquake insurance policies. The bill would require the amount of the assessment to be determined by the CEA in its sole discretion, but would limit the amount of an assessment on an individual assessable insurance policy in a year to not more than 2% of the annual insurance premium for that policy and would limit the duration of the assessment to no more than 10 consecutive years. The bill would also require the CEA, if existing funding sources are exhausted, to sell investment grade revenue bonds, issue or secure other debt financing, or both, in amounts to be determined by the CEA. The proceeds from the assessment would be used solely to repay the bonds or other debt authorized by the bill, plus specified costs. By creating and adding a new mandatory source of funding for a continuously appropriated fund, the bill would make an appropriation.
(4) The California Constitution requires the state to reimburse local agencies and school districts for certain costs mandated by the state. Statutory provisions establish procedures for making that reimbursement.
This bill would provide that no reimbursement is required by this act for a specified reason.
(5) This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3   Appropriation: YES   Fiscal Committee: YES   Local Program: YES  

The people of the State of California do enact as follows:


SECTION 1.

 Section 10089.5 of the Insurance Code is amended to read:

10089.5.
 As used in this chapter: chapter, the following words have the following meanings:
(a) “Authority” means the California Earthquake Authority.
(b) “Assessable insurance policy” includes both of the following:
(1) An insurance policy, whether or not issued in California, within a class of insurance defined in Chapter 1 (commencing with Section 100) of Part 1 of Division 1, excluding a policy or contract of renter’s, life, health, annuity, earthquake, title, mortgage, financial guaranty, workers’ compensation, medical malpractice, or insolvency insurance.
(2) An insurance policy issued by an eligible nonadmitted insurer through a surplus line broker, excluding a policy or contract of renter’s, life, health, annuity, earthquake, title, mortgage, financial guaranty, workers’ compensation, medical malpractice, or insolvency insurance.
(c) “Assessable insured” means a person who procures one or more assessable insurance policies from an assessing insurer and who is subject to assessment by the authority, as provided in Section 10089.315.
(d) “Assessing insurer” means an insurer or surplus line broker, identified by the department at the request of the authority, as an issuer of an assessable insurance policy to an assessable insured.

(b)

(e) “Available capital” means the sum of all moneys and invested assets actually held in the California Earthquake Authority Fund, less loss reserves and loss adjustment expense reserves under all of the authority’s policies of residential earthquake insurance, and less the unearned premium reserve. “Available capital” includes all interest or other income from the investment of money held in the California Earthquake Authority Fund. “Available capital” does not include unearned premium, the proceeds of contracts of reinsurance procured by or in the name of the authority pursuant to subdivision (a) of Section 10089.10, any funds realized on capital market contracts authorized by subdivision (b) of Section 10089.10, or the proceeds of bonds issued by or in the name of the authority. authority, or protected operating capital.

(c)

(f) “Basic residential earthquake insurance” means that policy of residential earthquake insurance described in Section 10089 except as follows: 10089.

(1)(A)If one year after the authority commences operation the authority has available capital equal to or exceeding seven hundred million dollars ($700,000,000), any policy issued or renewed on or after that date shall provide, less any applicable deductible, not less than two thousand five hundred dollars ($2,500) in coverage for additional living expenses.

(B)If the authority met the available capital requirements of subparagraph (A) and two years after the authority commences operation the authority has available capital equal to or exceeding seven hundred million dollars ($700,000,000), any policy issued or renewed on or after that date shall provide, less any applicable deductible, not less than three thousand dollars ($3,000) in coverage for additional living expenses.

(2)(A)If the authority did not meet the available capital requirement of subparagraph (A) of paragraph (1) but, two years after the authority commences operation the authority has available capital equal to or exceeding seven hundred million dollars ($700,000,000), any policy issued or renewed on or after that date shall provide, less any applicable deductible, not less than two thousand five hundred dollars ($2,500) in coverage for additional living expenses.

(B)If the authority met the available capital requirements as provided by subparagraph (A) and three years after the authority commences operation the authority has available capital equal to or exceeding seven hundred million dollars ($700,000,000), any policy issued or renewed on or after that date shall provide, less any applicable deductible, not less than three thousand dollars ($3,000) in coverage for additional living expenses.

(d)

(g) “Board” means the governing board of the authority.

(e)

(h) “Bonds” means bonds, notes, commercial paper, variable rate and variable maturity securities, and any other evidence of indebtedness.
(i) “California Earthquake Authority Fund” means the fund created pursuant to subdivision (b) of Section 10089.22.

(f)

(j) “Capital market contract” means an agreement between the authority and a purchaser pursuant to which the purchaser agrees to purchase bonds of the authority.
(k) “Claim-paying capacity” means the sum of all assets and all other forms of financing and financial capacity available to the authority to pay claims and claim expenses, including all of the following:
(1) The authority’s available capital.
(2) The maximum amount of all insurer capital contributions and assessments pursuant to Sections 10089.15, 10089.23, 10089.30, and 10089.31.
(3) All reinsurance actually available and under contract to the authority.
(4) Funds generated or realizable through surcharges imposed and collected pursuant to Section 10089.29.
(5) All capital committed and actually available from private capital markets.
(6) Funds generated or realizable through assessments to be imposed and collected pursuant to Section 10089.315.
(l) “Contingent capital expense” means the amount required to be paid by the authority, as established pursuant to subdivision (b) of Section 10089.316.
(m) “Council” means the California Catastrophe Response Council created pursuant to Section 8899.70 of the Government Code.
(n) “Earthquake event” means a seismic event that results in property losses covered under the terms of a policy or contract of residential earthquake insurance issued by the authority.
(o) “Mitigation and Contingent Capital Expense Reserve Fund” means the fund created pursuant to subdivision (b) of Section 10089.316.

(g)

(p) “Nonparticipating insurer” means an insurer that elects not to transfer or place any residential earthquake policies in the authority.

(h)

(q) “Panel” means the advisory panel of the authority.

(i)

(r) “Participating insurer” means an insurer that has elected to join the authority.
(s) “Person” means an individual or entity described in Section 19.

(j)

(t) “Policy of residential property insurance” means those policies described in Section 10087.

(k)

(u) “Private capital market” means one or more purchasers of bonds of the authority pursuant to a capital market contract.

(l)

(v) “Qualifying residential property” includes all those residential dwellings set forth in Section 10087.

(m)

(w) “Residential earthquake insurance market share” means an individual insurer’s total direct premium received for (1) residential both of the following:
(1) Residential earthquake policies and endorsements written or renewed by the insurer in California and (2) residential California.
(2) Residential earthquake policies written or renewed by the authority for which the insurer has written or renewed an underlying policy of residential property insurance, divided by the total gross premiums received by all admitted insurers and the authority for their basic residential earthquake insurance in California.

(n)

(x) “Residential property insurance market share” means an individual insurer’s total gross premiums received for residential property insurance policies written or renewed by the insurer, divided by the total gross premiums received by all admitted insurers for residential property insurance in California.

(o)

(y) “Revenue” means all income and receipts of the authority, including, but not limited to, income and receipts derived from premiums, bond purchase agreements, capital contributions by insurers, assessments levied on insurers, surcharges applied to authority earthquake policyholders, assessments levied on assessable insureds, and all interest or other income from investment of money in any fund or account of the authority established for the payment of principal or interest, or premiums on bonds, including reserve funds.
(z) “Total residential property insurance market share participation” means the sum of the individual residential property insurance market shares attributable to all authority participating insurers.

(p)

(aa) “Unearned premium reserve” means an amount equal to the unearned portion of premiums due to, or received by, the authority on all of its policies of residential earthquake insurance, without deduction on account of reinsurance ceded. The unearned premium reserve shall be charged as a reserve liability in determining the authority’s financial condition. Because the unearned premium reserve is established and maintained to protect the interests of authority policyholders in their unexpired authority policies, authority assets in an amount equal to the unearned premium reserve shall not be subject to encumbrance by, or distribution to, creditors of or claimants against the authority unless and until the authority has paid in full all policyholder claims and policyholder liabilities.

SEC. 2.

 Section 10089.13 of the Insurance Code is amended to read:

10089.13.
 (a) One year following its commencement of operations, and annually thereafter by each August 1, the authority shall report to the Legislature and the commissioner on program operations in a format prescribed by the commissioner. The report shall include, but shall not be limited to, the financial condition of the authority, a description of all rates and rating plans approved for use in the authority, an evaluation of the functioning of the authority in light of its stated purpose of making residential property insurance and residential earthquake insurance more available. The report shall also include an analysis of the growth by market share of residential property insurance of participating insurers compared to nonparticipating insurers, any adverse consequences on the various insurance distribution systems resulting from the operation of the authority or alterations in the growth of the residential property insurance market share between participating insurers and nonparticipating insurers, any adverse consequences of the various insurance distribution systems resulting from the operation of the authority or alterations in the growth of homeowners’ insurance market share between participating insurers and nonparticipating insurers, and an analysis of any recommended program changes to permit the authority to better fulfill its stated purpose. In making this determination the board shall be mindful of the competitive nature of the market and how any decision can negatively impact insurers who are currently competing in the marketplace. The report shall be posted on the authority’s official Internet Web site. internet website.
(b) The annual report shall include full information describing the following matters relating to the authority’s condition and affairs:
(1) The property or assets held by the authority, including the amount of cash on hand and deposited in banks to its credit, the amount of cash in the hands of servicing insurance companies, the amount of any stocks or bonds owned by the authority, specifying the amount, number of shares, and the par and market value of each kind of stock or bond, and all other assets, specifying each.
(2) The liabilities of the authority, including the amount of losses due and unpaid, the amount of claims for losses resisted by the authority and the amount of losses in the process of adjustment or in suspense, including all reported and supposed losses, the amount of revenue bonds or other debt financing issues under Section 10089.29 or Section 10089.50, and all other liabilities.
(3) Income of the authority during the preceding year, specifying premiums received, interest money received, and income from all other sources, specifying the source.
(4) Expenditures of the authority during the preceding year, specifying the amount of losses paid, the amount of expenses paid by category, and the amount of all other payments and expenditures.
(5) The costs and scope of all reinsurance and capital market contracts entered into by the authority under Section 10089.10.
(c) As part of the annual report, the authority shall make a separate, summary report on the financial capacity of the authority to pay claims made against the authority. Copies of this report shall also be made available to the public. The report shall include, but shall not be limited to, the following information, valued as of 30 days prior to the date of the report:
(1) The available capital of the authority.
(2) The liabilities of the authority.
(3) The amount of all assessments previously made and the amount of assessments that may be made in the future under Section 10089.23.
(4) The amount of the reinsurance under contract and actually available to the authority.
(5) The amount of all revenue bonds or other debt financing previously issued or contracted for and the amount of all revenue bonds or other debt financing that may be issued or contracted for in the future under Section 10089.29.
(6) The amount of surcharges previously assessed against policyholders and the amount of surcharges that are currently outstanding against policyholders under Section 10089.29.
(7) The amount of capital committed and actually available by contract from private capital markets that is available to pay claims against the authority.
(8) The amount of all assessments previously made and the amount of all assessments that may be made in the future under Section 10089.30.
(9) The amount of all assessments previously made and the amount of all assessments that may be made in the future under Section 10089.31.
(10) The amount of all assessments previously made and the amount of all assessments that may be made in the future under Section 10089.315.
(d) In verification of the matters set forth in the annual report provided for in subdivision (a), the Department of Finance shall approve independent qualified auditors selected by the commissioner to examine the books and accounts relating to all matters concerning the financial and program operations of the authority. The commissioner shall file a certified report of the examination with the President pro Tempore of the Senate, the Speaker of the Assembly, the Chairpersons of the Senate and Assembly Insurance Committees, and the Chairperson of the Senate Committee on Judiciary within 10 days of its receipt. Copies of this report shall also be made available to the public. The expense of examining the books and accounts of the authority shall be paid out of the operating funds of the authority.
(e) The authority shall, within 120 days following a seismic event that results in the payment of claims by the authority, and within one year of a major seismic event that results in the payment of claims by the authority, submit to the President pro Tempore of the Senate, the Speaker of the Assembly, the Chairpersons of the Senate and Assembly Insurance Committees, the Chairperson of the Senate Committee on Judiciary, and the commissioner a concise written report of program operations related to that seismic event. The reports shall include, but not be limited to, progress on payment of claims, claims payments made and anticipated, and the functioning of the authority in response to the seismic event. Copies of this report shall also be made available to the public.

SEC. 3.

 Section 10089.315 is added to the Insurance Code, immediately following Section 10089.31, to read:

10089.315.
 (a) It is the intent of the Legislature to enhance the authority’s existing claim-paying capacity by adding a new lower cost alternative to reinsurance and other existing financing tools. To accomplish this goal, it is the intent of the Legislature to authorize the authority to establish, but only if necessary following an unprecedented and catastrophic earthquake, a temporary, small assessment on certain property and casualty insurance policies in California.
(b) If claims and claim expenses incurred by the authority due to an earthquake event or subsequent earthquake event exhaust all the funding sources listed in subdivision (c), the authority shall determine, and the commissioner shall instruct all assessing insurers to collect, an assessment on assessable insurance policies, as authorized in this section. The amount of the assessment shall be determined by the board in its sole discretion, subject to the maximum limits in this section.
(c) The authority shall impose the assessment described in subdivision (b) if claims and claim expenses incurred by the authority due to an earthquake event or subsequent earthquake event exhaust all of the following:
(1) The authority’s available capital.
(2) The maximum remaining amount of insurer capital contributions and assessments, if any, pursuant to Sections 10089.15, 10089.30, and 10089.31.
(3) All reinsurance and risk transfer available through capital market contracts that are actually available and under contract to the authority.
(4) The maximum funds actually available to the authority based on the proceeds of postearthquake revenue bonds or other debt financing, repayment of which is supported by premium surcharges on authority policyholders pursuant to Section 10089.29.
(5) All capital committed and actually available from the private capital markets.
(d) (1) In addition to subdivision (b), if claims and claim expenses incurred by the authority due to an earthquake event or subsequent earthquake event exhaust all the funding sources listed in subdivision (c), the authority shall sell investment grade revenue bonds, issue or secure other debt financing of the authority, and issue or secure a combination of revenue bonds and debt financing, in amounts determined by the board.
(2) The Treasurer may act as agent for the sale of revenue bonds and shall make available the net proceeds of the revenue bonds or other debt financing as funding for the authority. Failure of the authority to obtain that funding does not obligate the State of California to provide or arrange replacement funding for the authority. The Treasurer may sell revenue bonds for the purpose of refunding the revenue bonds or other debt financing, and the proceeds of assessments authorized by this section may be used to repay that funding.
(e) The board shall establish the aggregate assessment amount to be collected by assessing insurers and shall determine the effective date on or by which assessment collection shall begin. Assessments shall be collected upon issuance, or upon renewal, of assessable insurance policies. The assessment shall be established as follows:
(1) The assessment on an individual assessable insurance policy in a year shall not exceed 2 percent of the annual insurance premium for that policy and shall not have a maturity of more than 10 consecutive years from the date of issuance.
(2) Subject to the limitation in paragraph (1), the board may redetermine the aggregate assessment amount annually to account for changes in the incurred liabilities of the authority for claims and claim expenses or in other circumstances giving rise to the assessment.
(f) The authority shall determine, and the commissioner shall notify the assessing insurers of, all information reasonably necessary to permit the timely collection and remittance to the authority of the assessment.
(g) The assessment amount shall be separately identified and stated on a billing statement or policy declaration sent to each assessable insured.
(h) The authority shall determine the rate of the assessment pursuant to subdivision (e) and shall determine the assessment collection period, which shall be uniform and mandatory for all assessable insurers and assessable insureds. Assessing insurers who collect assessments in excess of the assessment authorized by this section shall remit the excess to the authority within 30 days after the authority has determined, and given notice to assessable insurers of, the amount of the excess assessment. The excess assessment shall be retained by the authority and deposited into the Mitigation and Contingent Capital Expense Reserve Fund to be used for mitigation program related expenses and expenditures.
(i) Proceeds of assessments made by assessable insurers shall be transmitted to the authority or the authority’s designee within 30 days after the last day of the month in which the proceeds were received. The assessments shall be used solely to repay the bonds or other debt described in subdivision (c), plus costs of arrangement, issuance, and sale of bonds or other debt, and amounts paid or payable to bond issuers and providers of credit support and letters of credit for, and interest on, those revenue bonds or other debt, plus other expenses related to the assessment authorized by this section.
(j) Assessments collected pursuant to this section are not part of an insurer’s rates or rating plan, are not premiums for any purpose, and are not subject to premium tax, fees, or commissions, except that failure by an assessable insured to pay the assessment in a timely manner shall be deemed and treated as failure to pay a premium.

SEC. 4.

 Section 10089.316 is added to the Insurance Code, immediately following Section 10089.315, to read:

10089.316.
 (a) It is the intent of the Legislature to require the authority to make annual payments in exchange for the claim-paying capacity authorized pursuant to Section 10089.315, with the payments to be used for prewildfire home hardening and defensible space creation and maintenance programs and preearthquake retrofit and mitigation programs.
(b) Not later than April 1 of the following calendar year, commencing in the year in which this section becomes operative, the authority shall pay a contingent capital expense for the preceding calendar year, into the Mitigation and Contingent Capital Expense Reserve Fund, which is hereby created within the California Earthquake Authority Fund. The contingent capital expense shall be calculated by the authority as an amount equal to 2 percent of the amount of claim-paying capacity available to and actually relied upon by the authority for the preceding calendar year that is based upon and supported by the authority’s ability, if necessary, to impose an assessment pursuant to Section 10089.315. The board may, in its sole discretion, pay the annual contingent capital expense on a date earlier than required pursuant to this subdivision. The contingent capital expense approved by the board shall be transferred annually by the authority into the Mitigation and Contingent Capital Expense Reserve Fund, which shall be deemed for all purposes to be a required expense of and cost to the authority.
(c) Money deposited into the Mitigation and Contingent Capital Expense Reserve Fund by this section shall periodically be disbursed and reserved by the authority, upon approval and direction of the council, as follows:
(1) To the Earthquake Loss Mitigation Fund established pursuant to Section 10089.37, an amount equal to one-third of the amount of the annual contingent capital expense or a lesser amount as the board determines appropriate to pay incurred or anticipated mitigation program related expenses and expenditures.
(2) To the California Wildfire Loss Mitigation Program established pursuant to Section 3298 of the Public Utilities Code, an amount equal to two-thirds of the amount of the annual contingent capital expense or a greater amount as the council determines appropriate to pay incurred or anticipated mitigation program related expenses and expenditures.

SEC. 5.

 Chapter 4 (commencing with Section 3298) is added to Part 6 of Division 1 of the Public Utilities Code, to read:
CHAPTER  4. Wildfire Loss Mitigation Fund

3298.
 (a) The administrator, the Office of Emergency Services, and the Office of Energy Infrastructure Safety shall create the California Wildfire Residential Loss Mitigation Program, as a joint powers authority.
(b) The program shall include all of the following:
(1) Activities that mitigate against utility caused wildfire risks to residential structures, for the benefit of homeowners, other property owners, including landlords with smaller holdings, contributors to the fund, including ratepayers and shareholders, and the general public of the state.
(2) Collaboration with academic institutions, nonprofit entities, and commercial business entities in joint efforts to conduct mitigation-related research and educational activities, and conduct program activities to mitigate against wildfire risk.
(3) Financial assistance in the form of loans, grants, credits, rebates, or other financial incentives to further efforts to mitigate against wildfire risk, including wildfire retrofitting of residential structures under the grant program established pursuant to Section 3298.4.
(4) Collaborations and joint programs with subdivisions and programs of local, state, and federal governments, and with other national programs that may further California’s disaster preparedness, protection, and mitigation goals.
(5) Other programs, support efforts, and activities deemed appropriate by the council to further mitigation and mitigation-related goals.
(c) The program shall have authority to hire staff and incur reasonable administrative expenses, subject to regular review and approval by the administrator, in consultation with the council.

3298.1.
 (a) The administrator, in consultation with the council, shall establish the office and duties of the chief mitigation officer.
(b) The duties of the chief mitigation officer shall include both of the following:
(1) Serving as liaison between the administrator and the California Wildfire Residential Loss Mitigation Program.
(2) Overseeing all mitigation efforts undertaken pursuant to this chapter.

3298.2.
 The governing board of the California Wildfire Residential Loss Mitigation Program shall be composed of the chief mitigation officer established pursuant to Section 3298.1, and one representative of the administrator, the Office of Emergency Services, and the Office of Energy Infrastructure Safety.

3298.3.
 (a) The Wildfire Loss Mitigation Fund is hereby established as a subaccount in the fund. Moneys in the Wildfire Loss Mitigation Fund are continuously appropriated for the purposes of this chapter. The council shall set aside in each calendar year an amount equal to 5 percent of the investment income accruing on the fund’s invested moneys, or ten million dollars ($10,000,000), whichever is less, if deemed actuarially sound by a consulting actuary employed or hired by the administrator. The administrator shall deposit those moneys in the Wildfire Loss Mitigation Fund for the purpose of funding the California Wildfire Residential Loss Mitigation Program. If this set-aside may impair the actuarial soundness of the fund, the administrator may delay the implementation of this section. If the administrator delays implementation, it shall report that fact to the Legislature and post a copy of that report on the fund’s internet website.
(b) The administrator shall establish the operational rules of the Wildfire Loss Mitigation Fund as part of the Wildfire Fund’s plan of operations. On or before July 1, 2022, the administrator shall establish, in the operational rules of the Wildfire Loss Mitigation Fund, a plan for the implementation of a statewide residential retrofit program. The plan shall include personnel and administrative requirements, and all other programmatic specifications necessary for the implementation of the plan.
(c) The administrator may accept grants and gifts of property, real or personal, tangible and intangible, and services from federal, state, and local government sources, and private sources, for the Wildfire Loss Mitigation Fund.

3298.4.
 (a) The board of the California Wildfire Residential Loss Mitigation Program shall develop a residential wildfire retrofit grant program to provide grants to assist a qualifying owner of a single-family residential structure by defraying the owner’s costs of wildfire retrofitting of the structure or to create defensible space around the structure.
(b) The board may make a grant to an applicant who satisfies all of the following requirements:
(1) The applicant is an owner of record of the structure to be retrofitted.
(2) The structure is a single-family, detached, residential building, composed of one to four, inclusive, dwelling units.
(3) The structure meets structural requirements established pursuant to subdivision (d).
(4) The structure is located in a high-risk wildfire area, based on criteria established pursuant to subdivision (d).
(5) The retrofit work qualifies as work for which the applicant may receive a grant, based on criteria established pursuant to subdivision (d).
(c) Subject to the policies, procedures, and criteria adopted pursuant to subdivision (d), a grant shall not exceed the lesser of 75 percent of the cost of the qualifying retrofit work, or ten thousand dollars ($10,000).
(d) The board shall adopt policies and procedures to implement this section, including establishing structural eligibility requirements for structures that will receive a grant for wildfire retrofitting work, defining criteria for determining whether a structure is located in a high-wildfire-risk area, and defining criteria for wildfire retrofitting work that qualifies as work eligible for receipt of a grant. In adopting those policies and procedures, the board shall provide notice and opportunity for public review and comment, publish the policies and procedures on the program’s internet website, and otherwise make the policies and procedures available to the public.
(e) The board shall ensure that, to the maximum extent practicable, grants are awarded to retrofit structures that minimize losses associated with catastrophic wildfires.
(f) The board shall ensure that grants are awarded in proportion to contributions to the Wildfire Fund from electrical corporation shareholders and ratepayers.

3298.5.
 (a) The board of the California Wildfire Residential Loss Mitigation Program shall do both of the following:
(1) Provide outreach to low-income households to increase awareness of the grant program established pursuant to Section 3298.4 in communities where the program is offered.
(2) (A) Set aside at least 10 percent of the funds available each year for the program established by Section 3298.4 to provide supplemental grants to homeowners in low-income households who were selected to receive grants pursuant to Section 3298.4.
(B) A homeowner in a low-income household may apply for a supplemental grant, which shall be awarded on a first-come-first-served basis until the funding set aside for supplemental grants is exhausted.
(C) The supplemental grant shall be in the amount necessary to provide the homeowner in the low-income household with 90 percent of the retrofit costs remaining after payment of the grant awarded to that homeowner pursuant to Section 3298.4.
(D) Any unexpended supplemental grant funding shall be made available to provide grants to other eligible applicants on the waiting list.
(b) For purposes of this section, “low-income household” means a household that has an income at or below 80 percent of the median household income in California.

SEC. 6.

 No reimbursement is required by this act pursuant to Section 6 of Article XIII B of the California Constitution because the only costs that may be incurred by a local agency or school district will be incurred because this act creates a new crime or infraction, eliminates a crime or infraction, or changes the penalty for a crime or infraction, within the meaning of Section 17556 of the Government Code, or changes the definition of a crime within the meaning of Section 6 of Article XIII B of the California Constitution.

SEC. 7.

 This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
The California Earthquake Authority requires significant lead time to fully implement and realize the benefits of the sustainability enhancements to its claim-paying capacity provided for in this act, and to develop and implement new and enhanced wildfire and earthquake mitigation programs for the benefit of vulnerable homes and citizens in California. Scientific evidence strongly indicates that California will experience worsening wildfires due to climate change and that California is overdue for its next major earthquake, so it is, therefore, necessary and essential that this act take effect immediately.