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Lawmakers Contemplate Residual Market's Future

Ever since state lawmakers recognized the need for a residual market to provide Florida residents in high-risk areas with homeowners' coverage, the guiding public policy position has been that major

By Michael H. Adams | Updated on November 30, 2005

Ever since state lawmakers recognized the need for a residual market to provide Florida residents in high-risk areas with homeowners’ coverage, the guiding public policy position has been that major losses would be subsidized after the fact in exchange for keeping rates affordable today. In establishing Citizens Property Insurance Corporation — and its predecessors — lawmakers created a catastrophic funding plan that depended heavily on policyholder assessments to pay claims and fund bonds and other debt instruments to pay off long-term deficits. Due to a confluence of events, namely a lack of major hurricane losses, the use of assessments remained a theoretical proposition that lawmakers and the public could largely ignore. However, after the 2004 and 2005 hurricane seasons, the need for Citizens’ assessments has become a financial reality and what seemed like a good idea yesterday has become today’s crisis.

Losses and Assessments

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