We can't count on the Federal Emergency Management Agency to step in as it did after the Northridge quake. People living outside the state are tired of subsidizing California's disaster recovery efforts. Provisions of the National Disaster Protection Partnership Act, pending in Congress, reflect this. If the act is passed, any homeowner earning more than $60,000 a year who does not have earthquake insurance will be denied federal emergency funds. Also, the federal government's share for repairing freeways and public buildings will fall to 50% (it paid 90% after the Northridge quake).

We have chosen to live in a high-risk area. The insurance industry in California bears approximately $3.6 billion worth of earthquake risk annually.

There may be only minor losses in any given year, but one year a major fault will rupture and the industry will incur tens of billions in losses. Rightly, insurers are unwilling to insure us if they are not sufficiently compensated.

The insurance industry now collects only $700 million in premiums a year. It is no wonder it is not interested in offering additional policies to California residents.

Insurance Commissioner Chuck Quakenbush's proposed California Earthquake Authority attempts to resolve the huge difference between insurance company liability and consumer premiums by offering us "reasonably" priced policies, but leaving us with substantial uninsured losses in the event of a major earthquake.

The CEA proposes an insurance pool that would be funded at $10.5 billion, about two-thirds coming from the insurance industry, the remainder from accumulated premiums of policyholders. The latter source of funds will take time to build up. If we say yes to the CEA, we are betting that we will not have a major earthquake in the near future.

If insured losses exceed available funds, the state is authorized to borrow up to $3 billion more. But, who will lend us money? If the federal government's contribution declines, roads will remain unrepaired for longer periods; our economy will have difficulty recovering. CEA policyholders, despite having suffered huge losses, will be responsible for paying off the loans. We will find it costly to borrow. After all of this, if we are still short of funds, policyholders will be paid on a pro-rata basis.

If this makes you want to move out of California, it means you are starting to get a feel for the true costs of living here. Someone has to pay these costs. It won't be the insurance companies unless we buy insurance that covers our potential loss. To get this we are going to have to pay a lot of money. The only real alternative to paying the right amount for insurance now is bearing the costs after the quake, when we will not be in a position to come up with the money.

We need to allow and promote competitive, efficient, private insurance markets. Major disasters will happen and, although it is not politically popular, we need policies that encourage property owners to be as close to fully insured as possible.

Insurance premiums must reflect the true risk of living in this area. There is no cheap way to protect ourselves from these risks. The CEA is not a solution; it will leave the state desperately underinsured.