Citizens Property Insurance Corporation has been an unwieldy organization ever since lawmakers created the residual market in 2002. (See related story in Capitol Line.) At the time, the industry opposed the creation of Citizens, as did many lawmakers, and it appeared all but dead in the legislature until an Internal Revenue Service ruling granted it tax-exempt status. Ever since then, Citizens has been an albatross that has required repeated regulatory and legislative action.

Although it was granted tax-exempt status and did lead to a reorganization of management, the residual market remains largely a bifurcated entity. On one hand is the personal lines account, which issues all-perils policies. Then there is the high-risk account that only covers wind risk in certain areas of the state. Each account is supported by a separate funding structure and serves different roles in the market. However, since Citizens is a single quasi-governmental entity, when it comes to making many regulatory and legislative decisions, they must apply across the board. As the legislative process has shown, this creates a difficult challenge when issues arise that need a solution.

The one constant about Citizens, which is consistent with the two former residual markets, is that it relies heavily on policyholder assessments. Coming at a time when the state saw few hurricanes, this funding mechanism was seen by lawmakers as an immense advantage. Unlike cash, lines of credit and bonds, assessments are virtual money whose inclusion in the law was painless. As long as the state did not suffer any major hurricane losses, Citizens' assessment authority laid dormant, which arguably allowed the insurer to operate with less than actuarially sound rates.