6.4 The Citizens Account and the Deficit Assessment Sequence

Statutory Operating Structure and the Single Citizens Account

Historically Citizens segregated its business into three statutorily firewalled accounts — the Personal Lines Account (PLA), the Commercial Lines Account (CLA) and the Coastal Account (the successor to the Florida Windstorm Underwriting Association). Surplus in one account could not be used to cure a deficit in another, so a coastal hurricane could trigger assessments even while the inland accounts were solvent.

Senate Bill 2A eliminated that structure. F.S. § 627.351(6) now speaks of a single "Citizens account." Deficits, surcharges and assessments are calculated corporation-wide rather than account by account.

What Citizens Writes Today

• Personal lines residential: homeowner, mobile home owner, dwelling fire, tenant and condominium unit-owner policies, written either as multiperil coverage or, in the wind-eligible coastal territories defined as of January 1, 2002, as wind-only coverage.
• Commercial lines residential: condominium association and apartment building policies. Citizens may not write new commercial residential multiperil policies; it continues to offer commercial residential wind-only coverage and may offer commercial residential policies that exclude wind. It may renew a commercial residential multiperil policy only on a building it insured on that basis as of June 30, 2014.
• Commercial nonresidential: property policies in the wind-eligible coastal territories.

Governance and Legal Character

• Citizens is a government entity that is an integral part of the state, not a private insurance company, and its income is exempt from federal income taxation.
• It is governed by a Board of Governors appointed by the Governor, the Chief Financial Officer, the President of the Senate and the Speaker of the House.
• Its obligations are not backed by the full faith and credit of the State of Florida; general revenue may not be used to pay Citizens claims.
• Acceptance or rejection of a risk by Citizens is treated as the private placement of insurance, so Chapter 120 administrative-hearing rights do not attach to an underwriting decision.
• Citizens must make best efforts to procure catastrophe reinsurance covering its projected 100-year probable maximum loss, and must include the cost of that reinsurance in its rates even in a year it does not buy it.

Citizens Deficit Funding After SB 2A

Unlike a private insurer, Citizens cannot become insolvent or file for bankruptcy. If a catastrophic season exhausts its surplus, reinsurance and Florida Hurricane Catastrophe Fund recoveries, F.S. § 627.351(6)(b)3. gives it a statutory funding sequence. Senate Bill 2A reduced that sequence from three tiers to two by deleting the regular assessment against private insurers. Older study materials that still describe a "2% regular assessment on carriers," or a "45% maximum surcharge across three accounts," are describing repealed law.

[Board of Governors determines the Citizens account has a projected deficit]
                  │
                  ▼
┌────────────────────────────────────────────────────────────┐
│ STEP 1: Citizens Policyholder Surcharge                    │
│ • Levied ONLY on Citizens' own policyholders               │
│ • Uniform percentage of premium, UP TO 15%                 │
│ • Collected on cancellation, renewal, or new issuance      │
│   within the first 12 months after the levy                │
│ • Not premium; no commissions, fees, or premium tax        │
└────────────────────────────────────────────────────────────┘
                  │  (deficit remaining after surcharge)
                  ▼
┌────────────────────────────────────────────────────────────┐
│ STEP 2: Emergency Assessments                              │
│ • Levied on ASSESSABLE INSUREDS statewide, for as many     │
│   years as needed, collected by every assessable insurer   │
│ • Uniform % of direct written premium for subject lines    │
│ • NFIP flood premiums excluded                             │
│ • Annual cap: the GREATER of 10% of the amount needed to   │
│   cover the deficit or 10% of statewide direct written     │
│   premium for subject lines                                │
│ • Collection begins at least 90 days after the levy        │
└────────────────────────────────────────────────────────────┘

Step 1: The Citizens Policyholder Surcharge

• Who pays: Citizens policyholders only.
• Amount: a uniform percentage of policy premium, up to 15%, set by the board.
• When collected: on cancellation or termination of the policy, on renewal, or on issuance of a new Citizens policy within the first 12 months after the levy, or over the period needed to collect it in full.
• Legal character: the surcharge is not premium and is not subject to commissions, fees or premium taxes — but failing to pay it is treated as failing to pay premium, so the policy can be cancelled.

Step 2: Emergency Assessments

• Who pays: assessable insureds across Florida — policyholders of admitted carriers and surplus lines insureds alike — collected by assessable insurers and, for surplus lines, by the surplus lines agent at the time the surplus lines tax is collected.
• What is exempt: National Flood Insurance Program policies. Workers' compensation, medical malpractice, accident and health, and federal flood premiums are outside the "subject lines of business" definition.
• Amount: a uniform percentage of that year's direct written premium for subject lines, capped in any calendar year at the greater of 10% of the amount needed to cover the deficit (plus financing costs) or 10% of statewide direct written premium for subject lines.
• Duration: levied "for as many years as necessary," typically pledged to retire post-event revenue bonds.
• No relief: there is no credit, limitation, exemption or deferment from an emergency assessment. An insurer that is excused from other obligations must still collect it.
• Timing: the office notifies insurers of the collection start date, which must be at least 90 days after Citizens levies the assessment.

Summary of Citizens Deficit Funding