Information in this section of the “Shop and Beware” website is for consumers seeking coverage from, or already insured in, Citizens Property Insurance Corporation (Citizens). This particular subheading provides the historical development of residual markets generally and then Citizens specifically. Other subsections within this subject area concern the nature and extent of policyholder assessments due to deficits that could occur in one or more of Citizens three accounts: the High Risk Account (HRA), the Commercial Lines Account (CLA), or the Personal Lines Account (PLA); possible coverage gaps, assessments from other entities and more. To help you understand the full picture, we’ve provided background and history below on residual markets as well as the development of the assessment concept in Florida.
Citizens has been given a high profile of late and is certainly an option to standard market coverage; but, there are differences that need to be taken seriously by all consumers. While other government entities, such as the Florida Hurricane Catastrophe Fund (FHCF or CAT Fund) and the Florida Insurance Guaranty Association (FIGA), are also subsidized with consumer assessments and, thus, are covered briefly under a separate tab, Citizens’ assessments are given emphasis because recent changes make assessments for its policyholders significantly more substantial and likely. Conversely, the same changes, impacting Citizens’ policyholders negatively, reduce both the likelihood and amount of any assessment for consumers who purchase their insurance in the standard market. The purpose of the click-to titled Citizens assessments is to bring that difference to light so consumers can make a fully informed decision “before” purchasing a Citizens policy.
We recognize this is a complicated subject and every attempt has been made to simplify it while maintaining absolute accuracy and completeness. Should questions remain, you can click to additional assistance from the Office of Insurance Regulation, the Department of Financial Services, or the Office of the Insurance Consumer Advocate, from the home page or call your insurance agent.
HISTORY
RESIDUAL MARKETS
Many states have established “Residual Markets”—government or quasi-government insurance facilities that provide coverage to individuals and/or businesses that cannot find it in the private marketplace. These facilities can be for any type of risk or exposure; however, the most common are usually automobile or high risk property coverage. Medical malpractice, flood, workers’ compensation, and earthquake are other examples of residual market coverages provided in Florida and other states, or by the federal government. Residual Markets can also be referred to as: FAIR Plans; Beach, Windstorm Plans, or Pools; Joint Underwriting Associations or JUAs; or may even be given names styled after the private sector like “Citizens Property Insurance Corporation.”
FLORIDA BACKGROUND--Florida established the Florida Windstorm Underwriting Association (FWUA or Wind Pool) in 1970 to insure “wind only” in Monroe County and the Florida Keys. Over time, the FWUA was expanded to include all or parts of 29 of Florida’s 35 coastal counties. The “tri-county” area of Dade, Broward, and Palm Beach came on board after Hurricane Andrew struck in 1992.
Like many residual markets, whenever losses exceeded available funds (creating a deficit), Florida’s wind pool would assess insurance companies who recouped the assessments from their policyholders—by definition, then, those paying for wind pool deficits were those not insured by the wind pool.
After Hurricane Andrew, there was a need to create another residual market for coastal wind exposure, which could provide protection beyond just wind—a full homeowners policy. Thus, the Florida Residential Property and Casualty Joint Underwriting Association (FRPCJUA or Homeowners JUA) was created in 1992 and structured similarly to the FWUA; that is, deficits were “cured” by levying assessments on insurance companies who passed them on to their policyholders. In 1995, the FRPCJUA absorbed another property residual market, which insured commercial residential or condominium and apartment buildings, called the FPCJUA.
In August 2002, the Florida Legislature merged the FWUA with the FRPCJUA, creating “Citizens” and retaining the ability to levy “Regular Assessments” on insurers based on deficits in any one of its three accounts. It also maintained the existing ability to levy “Emergency Assessments” whenever Regular Assessments weren’t enough. Emergency Assessments flow direct to policyholders rather than to insurers who then recoup from policyholders and are used as collateral for loans to pay down the deficit. At the time, Citizens’ deficits had to be calculated separately, and assessments levied separately, for each of its three accounts. Those accounts are as follows:
1. High Risk Account (HRA): provides wind-only policies in limited coastal areas of the state (formerly known as the Wind Pool);
2. Personal Lines Account (PLA): provides multi-peril policies throughout the state of Florida (formerly known as the FRPCJUA);
3. Commercial Lines Account (CLA): provides commercial residential policies throughout the State of Florida (this is the condo and apartment building coverage of the former FPCJUA, which merged into the FRPCJUA in 1995).
2007 Changes--Finally, in 2007 Citizens was made more accessible and its assessment formula was changed in several important ways. It became more easily accessed because anyone could get coverage there as long as they could only find a quote from a standard market carrier that was 15% higher for comparable coverage. Second, the assessment mechanism was changed to a “surcharge” that was to be levied upon all policyholders upon renewal and it was increased to 15% per account. With three accounts, then, the worst case scenario became the potential of a 45% surcharge. See the subheading titles Citizens assessments for a more detailed explanation.