In a newly revised white paper titled "Residual Market Property Plans: From Markets of Last Resort to Markets of First Choice," the Insurance Information Institute (I.I.I.) cautioned that the finances of many residual market property plans in hurricane-exposed states lack solid footing.

In the report, I.I.I. explained that certain plans are increasingly strained by the credit crunch and the prolonged economic downturn. This means that it is more difficult to borrow funds and therefore many state-run insurers are putting themselves at a heightened risk through greater dependence on bond markets.

"Disruptions to credit markets will likely make it more expensive for some of these plans to issue debt to pay for hurricane losses," wrote I.I.I. President and Economist Robert Hartwig and Claire Wilkinson, I.I.I. vice president – Global Issues, co-authors of the paper. "Ill-advised legislative steps over the course of several years have also expanded the exposure base of a number of plans such as Florida, yet at the same time curbed the rates they can charge. Such moves put state finances under threat and leave taxpayers and policyholders facing the potential for increased assessments in the years to come."