From the section on the history of Citizens you learned about the FWUA and the FRPCJUA. Before learning more about Citizens assessments/surcharges, a review of the factors impacting assessments by the FWUA and FRPCJUA prior to the storms of 2004 and 2005 might be helpful.
- The FWUA did not provide coverage in Dade, Broward, and Palm Beach Counties when Hurricane Andrew hit in 1992 and therefore it did not incur a deficit or levy an assessment. It has since been expanded to include Dade and Broward Counties, east of I-95, and parts of Palm Beach, Pasco, and Hernando Counties as well. Again, the FWUA is nothing more than the current HRA (High Risk Account) of Citizens.
- The last FWUA assessment was $100 million in 1998 due to losses sustained by hurricanes making landfall outside the tri-county area in Southeast Florida.
- There were no assessments from the predecessor organizations (the FWUA or FRPCJUA) or Citizens between the 1998 assessment and the deficit incurred by Citizens from the 2004 storms.
- The 1980s and 1990s were a “down cycle” for hurricanes. Meteorologists now unanimously agree the US has entered a period of increased frequency and severity, which could last several decades.
2004/2005 SEASONS—During the 2004 hurricane season, four major hurricanes made landfall in Florida. Over 1.7 million claims were filed, impacting all 67 counties. One in every five (20 percent) of Florida residences suffered damage. Citizens incurred a $516 million deficit, which meant, on average, that every non-Citizens’ property policyholder in Florida received a 6.8 percent assessment. The exact amount varied by company, and a few companies even decided not to “immediately” assess their policyholders, recording a loss to be recouped in future rate increases instead.
Then, in 2005, most attention was directed to the damage Hurricane Katrina brought to New Orleans and neighboring Gulf Coast states. However, another four hurricanes made landfall in Florida that year, including Wilma; the third most expensive insured hurricane loss in U.S. history. More importantly, Wilma hit Southeast Florida where Citizens had significant, concentrated exposure, causing deficits in all three accounts, including a $1.7 billion deficit in the HRA. At the end of the sixteen-month period, which included parts of two hurricane seasons, Florida had averaged one landfall hurricane every 60 days. The Florida Legislature appropriated $715 million to cure the deficits in Citizens’ PLA and CLA accounts, using any funds remaining to lower the HRA deficit.
For the HRA deficits in plan year 2005, Citizens levied a Regular Assessment of 2.07 percent and an Emergency Assessment of 1.4 percent to be charged for 10 years.
2006 ASSESSMENT CHANGES
The Legislature made significant changes to the assessment approach of Citizens during the 2006 session. In particular, instead of only assessing those in the standard marketplace (then having to surcharge Citizens’ rates to keep it non-competitive), lawmakers brought Citizens’ policyholders into the overall assessment formula, dividing them into two categories: homestead and non-homestead. The former are those with a homestead exemption as defined for purposes of Citizens’ assessments and the latter was everybody else—non-homestead residential policyholders and commercial policyholders in any of Citizens’ three accounts.
The 2006 Legislature also established an assessment payment priority with some groups of Citizens’ policyholders paying before others. But, ultimately the homestead/non-homestead distinction was repealed and Citizens’ assessments were converted to “surcharges” and the cap increased to 15 percent for each of three accounts.
Lawmakers also reduced assessments that might ultimately accrue to the voluntary market by expanding the assessment base (those who can be assessed) to include auto and other lines, except for medical malpractice and workers’ compensation, and establishing various caps that limit the annual exposure for regular assessments to 16 percent.
The best and most complete explanation for calculating a Citizens surcharge is found on the Citizens website and can be accessed by clicking here.