For years, Florida’s property insurance market has been defined by instability—rising premiums, insurer exits, and growing reliance on the state as a backstop. Residents know the system has been under strain. But recent reforms are beginning to shift that trajectory in meaningful ways. One of the clearest indicators of this change is the role of Citizens Property Insurance Corporation (Citizens), Florida’s insurer of last resort.
Citizens’ purpose is to provide coverage to consumers unable to get coverage anywhere else. Citizens began in 2002 as a not-for-profit government entity designed to provide property insurance for commercial and personal lines property policies covering personal, commercial and coastal, with and without wind depending on location and coverage.
While Citizens’ policyholder premiums primarily fund Citizens, in the case of deficit resulting in insufficient funds from events like severe storms, an emergency assessment can be levied on any Florida policyholder outside of Citizens, and can be up to 10 percent of policyholder premium for most property and casualty policies for as many years as necessary to pay claims. In this case, it leaves non-Citizens’ policyholders on the hook to pay for claims. Because of these assessments, Citizens’ financial health matters significantly to all policyholders across the state, not just those insured by Citizens.
When Citizens expands by adding policyholders, it signals the market is not functioning as a last resort, but rather a first choice for insureds. Citizens hit a policy high in 2023 holding 1.4 million policies. For Citizens to hold such a high policy count means that if a severe storm resulted in a deficit, all policyholders are at risk of having to pay for Citizens’ policyholder claims. Because Citizens rate increases are limited, they do not necessarily charge rate to the level of actual risk.
When something like severe weather results in high claims costs, Citizens can run out of funds to pay claims, and can then charge all policyholders to cover the difference. In effect, a policyholder in north Florida could be charged an assessment on their private auto policy to help pay for claims for Citizens’ policyholders in southern Florida.
Thankfully, lawmakers took swift action. As a result of holistic reforms, policies decreased 45 percent within two years and exposure, the policy loss potential, decreased 53 percent according to their most recent Florida 2030 Blueprint Halftime Report.
Part of the original problem started with changes to the program in 2007. The legislation was aimed at targeting high premiums in the private market. Though formed as a last resort, this legislation opened Citizens’ coverage to anyone whose private insurance offers were more than 15 percent above the price of Citizens.
In 2015, Citizens was the “largest property insurer” in the state, according to a state House of Representatives staff analysis. Citizens had over 44 percent of their roughly 630,000 residential and commercial policies located in coastal areas with great weather risk. This placed all policyholders in the state at risk of an emergency assessment and was a signal that Citizens was distorting the private insurance market without solving the deeper issues.
In recent years, Florida lawmakers took a decisive approach and passed a round of reform bills in 2022 and 2023, to address the persistently strained insurance market. Legislation focused on closing legal loopholes and reducing frivolous lawsuits which increase costs for insurers and raise prices for consumers. The legislation also emphasizes consumer protection by creating a program that provides discounts for weather proofing to mitigate risk; creates protections for consumers from frivolous cancelations; and requires consumer access to claim denial decision information.
Downward trending private insurance rates from these reforms coupled with the depopulation plan and incentives have resulted in some serious changes for the Florida insurance market. In addition to revitalizing the private market by adding 17 new insurance companies, companies are also filing no rate increases with some even requesting rate decreases.
As an insurer of last resort, Citizens is an indicator of how the insurance market is functioning in the state. When its policy count increases, that is a signal there is an issue and Citizens is no longer acting as a last resort. Lawmakers have addressed underlying issues to reduce premiums and prevent policyholder dependence on Citizens, sending them back to the private market where competition can thrive. Other states should follow suit by evaluating the health of their private insurance market through their state’s residual market plan and pushing targeted reforms to solve root cause problems.
Leah Locke is a policy analyst with the American Consumer Institute, a nonprofit education and research organization. Follow Leah on X @leahmlocke.