Our experts listed Endurance, Westchester, ICW, Arrowhead, RLI, Aspen, RSUI, Alterra, Northshore, Axis, Arch, Chubb, Commonwealth, Markel, WesternRe, London, Bermuda, American Empire, Chartis, ACE, Lloyd's, and Beazley as companies actively writing earthquake coverage in the United States. This list could expand considerably if the standard markets that write earthquake as part of all risk coverage were added.

Rob Kish, executive vice president; property brokerage at Crump Insurance Services, Inc., says, "The majority of E&S markets write on nonadmitted paper. There are a few exceptions, like ICW, that write on admitted paper. The factor is E&S placement versus standard market placement. Standard markets write on admitted paper."

"The carrier advises if the risk is eligible for admitted paper for the locations being submitted," explains Tina A. LaRocca, executive vice president of AmWINS Group, Inc. "After thoroughly marketing the risk, we then present all options to our retailers and it is ultimately up to the insured to decide. With commercial earthquake policies, only a handful of carriers are able to offer admitted paper in California."

According to Andy Roe, vice president–commercial lines underwriting at Arlington/Roe & Co., Inc., "The main factor impacting admitted versus nonadmitted status is the state where the risk is located." He then added the following regarding rates, "They vary greatly between non-quake/less quake-prone areas versus quake-prone areas. Non-quake-prone areas have a high percentage of $500 minimum premiums."

Mr. Kish explains, "Pricing is also driven by the type of buildings, geographic area, and the model carriers use to track their exposure in a particular quake zone or its proximity to a fault. The pricing for a location in San Francisco would normally be much higher than in San Diego. In non-quake-prone areas, it's a minimum charge to include the coverage in an all risk program."

Availability and pricing go together. "If you are in an earthquake-prone area, the rates will be significantly higher, and the market's ability to put up capacity will differ greatly," says Ms. LaRocca. "For example, a carrier may be able to offer only a $5 million limit on a location in Los Angeles that is worth $20 million in building values at a rate of .30/$100. However, put that same type of building in Arizona and the same carrier may be able to do the full $20 million for .05/$100."

Earthquake coverage is available as monoline coverage. It is also available as part of a Difference in Conditions (DIC) coverage and also as an endorsement to another property-related coverage form. Ms. LaRocca explains, "It can depend on the need to carve out specific perils to complete a large layered placement or ensure concurrency in terms. Each risk must be evaluated to identify the insured's specific needs."

"Most carriers have $10 million to $15 million in quake capacity, although there are exceptions," according to Mr. Kish. "Carriers will usually quota share a layer if you are trying to build up large limits. If it is not quake-prone, the all risk carrier could put up much higher limits, usually $25 million to $100 million."

There are specialized all risk carriers that could put up higher limits. Ms. LaRocca says, "Add in the London and Bermuda capacity and we are well on our way to $1 billion in limits."

Deductibles are normally sizable. Mr. Roe says, "Either a deductible amount is specifically requested on the submission or we typically quote with a 10% deductible. They can apply per building, per item or per total insurable values (TIV), and this should be clearly spelled out on the quote." Ms. LaRocca adds, "The deductible can be addressed several ways, including what is generally the best and broadest way for the insured, being on a per-unit basis."

Mr. Kish explains, "The deductible for critical quake is set by the carriers as a minimum, usually 5% of total values per location. Higher deductibles could be quoted at the insured's request. In areas outside of California, deductibles are determined based on the type of business, construction, age, etc., and how much premium is developed. In non-quake-prone areas, the deductibles vary from $25,000 up to $250,000, based on type of business "

An endorsement that Ms. LaRocca advises all clients to avoid is the Occurrence of Liability or Stated Value endorsement. "What this endorsement does is potentially limit what the carrier will pay on any given claim, from a covered cause of loss, to what the insured reported on the statement of values. The main problem is that the property may be properly valued today but, after a catastrophic event, demand for labor and materials is likely to skyrocket and the cost could end up being significantly higher than the stated values. As a result the insured, through no fault of its own, may no longer have adequate coverage to put it back in a pre-loss position."

If an excess form is used, Mr. Kish says, "It should be reviewed to make sure that it is concurrent with the primary form, that there is no gap in coverage, and that it has priority of payments and drop down wording in all layers."

Pricing is soft. Our experts all agree that pricing has dropped during the current year and they anticipate further softening. The main reason is the enormous capacity glut and more carriers entering the market. Individual characteristics such as construction, geographic location, and age continue to impact the specific pricing. In addition, a particular carrier's modeling and PML portfolio aggregate in specific locations affects its pricing strategy.

Mr. Kish provides a final word of caution for those who write earthquake coverage. "It's an annual aggregate limit. Once it is exhausted, it is not reinstated, so it's important to provide adequate limits for the insured. Flood coverage is also written with an aggregate limit. The Nashville flood that occurred in the spring is a perfect example of insureds not carrying enough limits or not having the property drop-down working to cover an additional future loss without having to reinstate new limits or cover gaps in current limits."

The price is right, the capacity is available, and the coverage is needed. Now is the time.