Even if you aren’t a customer of Citizens Property Insurance Corporation, if you live in Florida, you’re still a 'citizen' of the state-owned insurance company. To repay the enormous outlays for damage claims from past hurricanes, Citizens taps your pocketbook through assessments on most types of insurance you purchase, regardless of the source—but today’s assessments are small change compared to what’s possible if a catastrophic storm strikes Florida’s heavily-developed coastal cities and resort communities dead-on.
A Short History of Citizens
Florida entered the insurance business in 1970 by establishing the 'wind pool' (more formally known as the Florida Windstorm Underwriting Association) to write wind-only coverage in the Florida Keys. Over time, the wind pool grew to encompass parts of 29 coastal counties where private insurers feared to tread. Eventually, the company began to compete statewide for both wind and 'multi-peril' homeowners insurance on individual residences, as well as condo and homeowners associations.
Then came Hurricane Andrew, which struck the Homestead-Florida City area south of Miami in 1992. A Category 5 storm, Andrew was the second costliest hurricane in U.S. history, causing more than $26.5 billion in damages—equivalent to $43.9 billion in today’s dollars. In its wake, many private insurers abandoned the Florida market, making homeowners coverage difficult to obtain.
In response, the state legislature created the Florida Residential Property and Casualty Joint Underwriting Association (JUA) to write homeowners insurance. In 1995, the JUA absorbed a separate commercial joint underwriting association that insured condominiums and rental apartment buildings. In 2002, the legislature merged the wind pool and JUA, creating Citizens and transferring to it the JUA’s ability to assess if necessary to pay claims.
Eight named storms struck Florida in 2004 and 2005, causing significant damage. Citizens sustained a $1.766 billion deficit in 2005, and levied a one-time assessment in 2006 that yielded $163 million. The 2006 legislature allocated $715 million in general funds to reduce the deficit. In 2007, Citizens levied a 1.4 percent emergency assessment amortized over 10 years to recoup the remaining $878 million.