The study said efforts to attract new out-of-state companies to write homeowners insurance "have proven dismal failures. Florida's taxpayers, not insurance companies, have assumed massive liabilities on behalf of coastal residents."

Floridians living on the coast, the Institute said, will in the end have to pay higher rates for property insurance, while vigorous market competition will likely lower rates for those living inland and far from the coast.

The study said higher rates will at least reflect the risks inherent in living on a hurricane-prone peninsula, while advising that Floridians may, in some cases, find that their current modes of living cannot be sustained.

The paper said that recent recommendations of a task force that studied Citizens and recommended increasing rates by 10 percent yearly (with caps on rates for territories and individuals of 15 and 20 percent, respectively) are a good start but don't go far enough.

Such hikes, the report said, may be too mild or too harsh–and rather than having universal caps it suggested limits for those on fixed incomes.

"The state's taxpayers ought not to be obligated to ensure others the opportunity for hurricane-prone coastal living," said the report by Eli Lehrer, an adjunct scholar at the Institute.

Risk-based, market-driven insurance rates will, in the end, make Florida safer, more secure and more solvent, the report concluded. "The path toward a better system of insurance regulation will take time and will mean some pain for Florida residents, but it's the best choice. Florida simply can't afford the status quo," Mr. Lehrer said.

The paper called for elimination of the Temporary Increase in Coverage Layer (TICL) for the Hurricane Catastrophe Fund.

It noted that the layer–essentially the last $12 billion of the $28 billion total authorized amount of the Cat Fund–has never been funded and in all probability could never be funded.

"No rational insurance company would ever depend on the TICL layer in its actuarial calculations and, insofar as the [State] Office of Insurance Regulation allows insurers to consider it, it neglects its obligation to provide for insurer solvency. This elimination of the TICL layer should have no significant consequence for the state or its residents," the paper concluded.