Electronic copy available at: http://ssrn.com/abstract=1547343Electronic copy available at: http://ssrn.com/abstract=1547343

 

The Use of Post-Loss Financing of Catastrophic Risk

Submitted by:

Cassandra R. Cole, Ph.D. ** Associate Professor and Waters Fellow in Risk

Management and Insurance College of Business, Room 525 RBA

Florida State University Tallahassee, FL 32306-1110

Phone: 850-644-9283 Fax: 850-644-4077

Email: ccole@cob.fsu.edu

Kathleen A. McCullough, Ph.D. Associate Professor and State Farm Professor

of Risk Management/Insurance College of Business

Florida State University

David A. Macpherson, Ph.D. E.M. Stevens Distinguished

Professor of Economics Trinity University

James W. (Jay) Newman, Jr. Florida Catastrophic Storm Risk Management Center Florida State University 

Patrick F. Maroney

Director and Kathryn Magee Kip Professor Florida Catastrophic Storm Risk Management Center Florida State University

Charles Nyce, Ph.D. Associate Director

Florida Catastrophic Storm Risk Management Center Florida State University 

Article Forthcoming for Risk Management and Insurance Review

February, 2010

Electronic copy available at: http://ssrn.com/abstract=1547343Electronic copy available at: http://ssrn.com/abstract=1547343

 

ABSTRACT Catastrophic risk financing is a critical issue for many states. At the epicenter of the debate is the role of the state government in helping homeowners finance catastrophic storm risk. In general, states have used a variety of pre- and post-loss strategies, including rate regulation, residual markets, guaranty funds, and post-loss assessment structures. However, several states, including Florida, Louisiana, Mississippi, and Texas have used strategies that involve potentially large post-loss funding of hurricane risk. In some cases, the structure of the post-loss financing mechanism is likely to create significant assessments and subsidies. This paper examines the role of state government in catastrophe financing, focusing primarily on post-loss financing methods. Specifically, the paper provides a discussion of the advantages and disadvantages of the post-loss catastrophe financing as well as the political forces that motivate the use of this approach. Further, given the potential magnitude of post-loss assessments and related subsidies, we use the Florida homeowners property insurance market to illustrate the implications of the state’s decisions. This allows for a concrete discussion of the impact and viability of post-loss financing mechanisms.

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INTRODUCTION

Catastrophic storm risk is a critical issue for many states. Storms such as Katrina in

2005, Andrew in 1992, and Wilma in 2005 are some of the costliest catastrophes in U.S.

history with $43 billion, $23 billion, and $11 billion in damage respectively. In fact,

eight of the ten most costly U.S. catastrophes involving property damage were the result

of hurricanes. These large losses often have dramatic impacts on regional and state

economies including population displacements, federal aid expenditures, and state

property insurance markets. For example, after Andrew, eleven insurers became

insolvent and numerous other insurers lost enough capital to affect their ability to

maintain operations in Florida (Snyder, 1993). The Florida property insurance market

also was severely disrupted again after the 2004 and 2005 hurricanes. Following Katrina,

significant disruptions occurred in the Louisiana and Mississippi insurance markets

(Milligan, 2007).

The last year has brought about significant legislation in a variety of coastal states

that has focused on how to fund hurricane risk (Cole, Maroney, McCullough, and Nyce,

2009; Marlett, 2009). For example, in part due to the impact of Hurricane Ike in 2008,

the Texas Legislature has made significant changes to its windpool in an effort to

improve the method used to replenish the account following major hurricanes (Shannon,

2009). Specifically, the Legislature established policy surcharges in combination with

assessments on insurers to fund post hurricane bonds (House Bill 4409). The legislation

also instituted a 10 percent cap on the Texas Windstorm Insurance Association (TWIA)

rates (House Bill 4409).

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Recently passed legislation in Louisiana requires the state residual market entity

(LA Citizens) to charge rates 10 percent greater than the private market and rate by zip

code rather than by parish (Senate Bill 130). Also in 2009, the Mississippi Legislature

continued to subsidize rates by appropriating $40 million to protect residential and

commercial insureds of the Mississippi Wind Underwriting Association (MWUA) from

rate increases. The funds are to be used to purchase reinsurance for the MWUA

(Insurance Journal, 2009). This subsidy is an open and transparent effort designed to

promote economic activity in the coastal areas where the MWUA provides property

insurance.

Some states with hurricane exposure that have not experienced any recent storm

damage have also seen changes in the functioning of their insurance markets as well as

legislative changes. For example, recent legislation in North Carolina would allow

property insurance premiums in the entire state to increase by up to 10 percent to cover

the Coastal Property Insurance Pool (Pool) deficits when the Pool exhausts its funds and

the insurer’s limit is reached. In addition, the maximum coverage for residential

properties in the Pool would be reduced from $1.5 million to $750,000 (House Bill

1305). Also, Massachusetts, which has not experienced a major storm since 1954, has

seen a dramatic increase in the size of its residual market. Specifically, the number of

policies of the Massachusetts Property Insurance Underwriting Association (MPIUA)

doubled between 2001 and 2006, with over 40 percent of the homeowners on Cape Cod

being covered by the MPIUA in 2006 (Pleven, 2007).

States have approached the problem of financing catastrophic risk in different

ways; however, many of the solutions have at least some element of post-loss assessment.

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There are advantages and disadvantages to the various approaches in terms affordability

of coverage, size of the residual markets, the potential for insolvency, and the magnitude

of potential post-loss assessments. This paper provides a discussion of the post-loss

financing options available to states to fund hurricane-related losses. Special attention is

given to Florida and its current funding options because as noted by Grace and Klein

(2009), Florida is widely considered the epicenter of the debate with respect to hurricane

risk financing. Specifically, we analyze the case of the Florida property insurance market

as a means of quantifying both the magnitude of potential assessments as well as the

subsidies inherent in the structure.1 In addition, the potential impact and viability of post-

loss financing are explored, focusing on the potential public policy implications and areas

for future research. The findings of this study should be of interest to a variety of parties

as the decisions made by legislators and policymakers related to catastrophe financing

impact insurers, homeowners, renters, and businesses.

POST-LOSS CATASTROPHE FINANCING

While the magnitude of the exposure to catastrophic risk varies from state to state, all

states are working with the same set of financing mechanisms: private insurers and

reinsurers, windpools or FAIR plans, reinsurance facilities, guaranty funds, and possible

infusions of state or federal funds following a loss. As noted earlier, states have taken

various approaches to financing catastrophe exposure. In many cases, the advantages of

post-loss financing reflect the need to overcome the disadvantages of relying on pre-loss

                                                            1 To our knowledge we are the first to quantify the existence of post-loss assessment subsidies. The empirical example of the subsidies that can be created through lack of risk-based post-loss assessments is instructive to regulators and legislators tasked with financing catastrophic risk. 

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financing of risk. For this reason, we focus on the post-loss methods of catastrophe

financing.2

One of the key issues in the public policy debate surrounding property insurance

in hurricane-prone areas is the price of coverage. The primary benefit of post-loss

financing is lower rates, which can result in more affordable coverage for property

owners. In instances where insurance rates are a key part of the political landscape, this

also may benefit lawmakers associated with these decisions.

Lower rates by residual market insurers are possible partially due to differences

between these insurers and private market insurers. For example, state-run mechanisms

only need to raise as much capital as necessary to meet actual claim obligations. As such,

there is no need to pre-fund for every potential loss, only the loss that actually occurred.

In doing so, the state-run mechanisms avoid having to pre-fund the volatility in losses, or

risk load, that drive up the cost of pre-loss financing.

Another difference between residual market insurers and private market insurers

is that residual markets do not have to provide adequate returns to investors. If the risk is

truly extreme, insurers may charge five to 10 times more than the expected losses in an

effort to provide investors with a fair return on equity (Wharton Risk Management and

Decision Processes Center, 2008). In addition, some residual market entities enjoy

special tax status which allows for a lower cost structure than the private markets.3

Under the current tax structure, insurers are not able to set aside funds (on a tax-free

                                                            2 For a discussion of catastrophic financing from a pre-loss perspective, see Kunreuther, Meszaros, Hogarth, and Spranca (1995); Wharton Risk Management and Decision Processes Center (2008); von Ungern-Sternberg (2009.); Marlett (2009); and Cole, Maroney, McCullough, and Nyce (2009).  3 For example, the Florida Hurricane Catastrophe Fund is exempt from federal income taxation. As such, “the FHCF can accumulate premium payments from year to year on a tax-free basis to pay catastrophe losses when they occur” (Newman, 2009). 

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basis) for events that may occur in future years. Thus, these residual market entities can

charge lower premiums than private market firms (von Ungern-Sternberg, 2009). The

special tax status and ability to assess post-loss also helps reduce the cost of borrowing

for the state-run financing mechanism, which helps lower its cost of capital. This can be

passed on to policyholders in the form of lower rates. In some states, lower rates from

the state-run insurer also have the effect of suppressing rates in the private market. For

example, in 2007, the Florida Legislature rolled back and froze the rates of its residual

insurer and made it competitive with private insurers. As a result, the rates the private

insurers could charge also were suppressed, as the insurers had to maintain certain pricing

levels or risk losing business.

Another advantage to post-loss financing is insurers are not faced with managing

large levels of surplus, which can create the potential for moral hazard. More

specifically, firms maintaining large levels of surplus may distribute the surplus to its

shareholders and managers in the form of dividends or bonuses instead of maintaining

these funds within the company (von Ungern-Sternberg, 2009). As such, the funds would

not be available if a large loss occurred. In addition, some research suggests that small

firms may attempt to enter the market with a “go for broke” strategy in which they insure

a large number of homes in a relatively concentrated area without sufficient capital or

reinsurance to survive a large hurricane (Wharton Risk Management and Decision

Processes Center, 2008).

Though post-loss financing has some benefits, there also are some drawbacks.

First, the suppression of rates below market levels can lead to an increase in the size of

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the residual market as well as increases in potential post-loss assessments.4 Also, there is

uncertainty inherent in this approach. For example, after a catastrophic loss, regions

affected by the hurricane may receive an infusion of funds from federal sources, but the

availability of federal funds is not known until after the loss. In addition, in most cases,

there is no clear pre-loss plan for how these funds will be distributed or applied to reduce

potential post-loss assessments. Opponents of governmental involvement argue that

federal funds are typically used for emergency housing, post-loss cleanup, and repair of

infrastructure rather than the replacement of insurance claims for homeowners (National

Association of Insurance Commissioners, 2009).

Finally, post-loss financing can create inherent subsidies due to the assessment

structures present in states. For example, if assessments are not purely risk-based, it is

possible that lower-risk insureds pay larger post-loss assessments compared to their

exposure than do higher-risk insureds, thus creating a subsidy. Subsidies may not be

restricted to differences in hurricane risk. It also may result from a timing issue. For

example, if those paying the subsidies are new insureds in the state, it is possible that they

did not receive the benefit of below-market rates prior to the catastrophe (von Ungern-

Sternberg, 2009). Finally, subsidies may exist between the private and state-run markets

since the residual market mechanisms may be able to assess both their policyholders as

well as policyholders in the private market.

                                                            

4 The potential for rate suppression leading to a limited supply of private market insurance and reinsurance has been described by a variety of sources (e.g., Wharton Risk Management and Decision Processes Center, 2008). This could ultimately lead to a shortage in the availability of coverage from private insurers and reinsurers that must be filled by state mechanisms. Larger residual markets (windstorm or FAIR plans) are evidence of the effects of restrictive rate regulation. While several studies have shown significant growth in residual markets in coastal states, the growth in Florida has been the most significant (e.g. Wharton Risk Management and Decision Processes Center, 2008; Grace and Klein, 2009; Wharton Risk Management and Decision Processes Center, 2008). 

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A CASE STUDY ON POST-LOSS ASSESSMENT FINANCING

In the remainder of the paper, Florida is used to illustrate the potential impact of post-loss

assessment on residents. We focus on Florida for several reasons. As mentioned earlier,

while several studies have shown significant growth in residual markets in coastal states,

the growth in Florida has been the most significant (e.g. Wharton Risk Management and

Decision Processes Center, 2008; Grace and Klein, 2009). Additionally, as noted by

authors such as the Wharton Risk Management and Decision Processes Center (2008),

Grace and Klein (2009), and von Ungern-Sternberg (2009), the property insurance

market in Florida is at the epicenter of the public policy debates on the financing of

catastrophic risk. Finally, because of the frequency of hurricane landfall in Florida, the

likelihood of post-loss assessments being utilized is higher than in other states.

The Florida Homeowners Insurance Market

The state of Florida has chosen to finance its catastrophic risk exposure in large part

through post-loss assessments by entities such as the Citizens Property Insurance

Corporation (Citizens) and the Florida Hurricane Catastrophe Fund (FHCF). Citizens is

the state residual market insurer while the FHCF is the state run entity that provides

residential property reinsurance at below market rates. Additionally, the Florida

Insurance Guaranty Association (FIGA), the entity that pays the claims of insolvent

insurers, has the ability to assess in the event of insolvencies related to catastrophic

storms. Due to the assessment structures utilized and the potential size of the

assessments, the state of Florida presents an interesting case study on potential subsidies

in post-loss assessments since, in many cases, the ability to assess extends well beyond

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the policyholders and/or lines of business impacted by the catastrophic event. Also, there

are some questions with respect to lack of risk-rating of the assessment structure.

Homeowners have the choice of purchasing homeowners’ insurance coverage

from a private insurer or from Citizens. Citizens, in effect, competes with private

insurers on price. Both Citizens and private insurers purchase reinsurance from FHCF.5

The FHCF rates are currently substantially lower than private market reinsurance.

Although insurers are free to purchase private reinsurance in addition to that provided by

the FHCF, restrictive rate regulation has limited how much of those private reinsurance

costs can be reflected in the primary insurers’ rates. Before examining the issue of the

potential magnitude of the subsidies in Florida, a discussion of how deficit assessments

function and where the deficit assessment burden falls is required.

Deficit Assessment Structures and Processes

This section contains a review of the three primary insurance entities in Florida with the

power to levy post-loss assessments: Citizens, the FHCF, and the FIGA.6 The primary

focus relates to the overall organization, assessment base, and assessment structure of

each entity.

Citizens:7 Citizens has three distinct accounts, the Personal Lines Account (PLA),

Commercial Lines Account (CLA), and the High-Risk Account (HRA).8 Each account

                                                            5 The FHCF sells mandatory reinsurance layers and optional reinsurance layers. All insurers selling homeowners in Florida are required to purchase the mandatory layer.  6 For a more detailed explanation of these entities as well as major changes to the structure of these entities, see Newman (2009). 7 Citizens was legislatively created in 2002 and began operating on August 1, 2002 (Chapter 2002-240, Laws of Florida). The original purpose of Citizens was to provide property insurance coverage to those who could not obtain the coverage from private insurance companies. Currently, Citizens is allowed to

9

has a separate financial identity and the calculation of deficits and resulting assessments

are determined separately for each of the accounts. The current assessment base

definition for Citizens includes all property and casualty lines of insurance except

medical malpractice, accident and health, and workers’ compensation. When Citizens

has a financial deficit in any of its three accounts, it has statutory authority (Section

627.351(6)(b)2.a, Florida Statutes) to levy up to three different types of assessments. The

first assessment is the Citizens Policyholders Surcharge, levied on Citizens’

policyholders for each of Citizens’ three accounts. The amount of this surcharge reduces

the amount of the deficit before Citizens Regular Assessments and Emergency

Assessments are considered.

The second Citizens assessment is Citizens Regular Assessments. The principal

purposes of Regular Assessments are to cover smaller deficits quickly and to generate an

early flow of funds to Citizens when larger deficits occur. Regular Assessments are

imposed on private insurance companies and collected from policyholders that purchase

relevant types of insurance policies from surplus lines insurers.9 The admitted insurers

have the authority to recoup the amount of the Regular Assessments they paid to Citizens

by adding a surcharge to the premiums they charge their policyholders (Section

627.3512, Florida Statutes).

The third Citizens assessment is Citizens Emergency Assessments. The principal

purpose of Emergency Assessments is to allow Citizens to make principal and interest

payments on debt it issues to pay the claims associated with large hurricane losses when

                                                                                                                                                                                 operate competitively in the homeowners insurance marketplace. The number of policyholders insured through Citizens has grown rapidly in the past few years. At the end of 2008, the policy count exceeded one million (Citizens, 2009).  8 The accounts are defined in Section 627.351(6)(b)2, Florida Statutes. 9 For a definition of surplus lines see Part VIII of Ch. 626, Florida Statutes. 

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needed. Citizens levies Emergency Assessments not only on private insurance

companies’ policyholders and surplus lines policyholders subject to assessment, but on its

own policyholders as well. Citizens cannot levy Emergency Assessments unless the

maximum Policyholders Surcharge and Regular Assessments are not enough to cover the

deficit. The Emergency Assessments are collected when the policies subject to

assessment are renewed or when new policies are issued.

Citizens’ maximum attainable assessments in one year based on the assessment

structure and 2007 insurance premiums are approximately $17.3 billion:

1. The Citizens Policyholders Surcharge ($1.6 billion): Citizens can assess its

policyholders up to 15 percent of their premium for each of Citizens’ three

accounts (maximum of 45 percent of premium).

2. The Citizens Regular Assessments ($5.7 billion): Citizens can assess

admitted insurers and surplus lines policyholders up to the greater of six

percent of premium or six percent of the deficit for each Citizens account.

3. The Citizens Emergency Assessments ($10.3 billion): Citizens can assess

their policyholders, admitted insurers’ policyholders, and surplus lines

policyholders up to the greater of ten percent of premium or ten percent of

the deficit for each Citizens account plus an additional amount to cover

interest, fees, and other charges related to debt issued to cover hurricane

losses.

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FHCF:10 While the FHCF charges premiums for the coverage it provides, much of its

capacity to meet its obligations to insurance companies is based on the assessments it is

authorized to levy on insurance companies. The FHCF has charged rates for its coverage

substantially below the rates charged for comparable coverage by private reinsurance

companies.11

The FHCF’s assessment base is very similar to Citizens’ current assessment base.

Specifically, included are all lines of property and casualty insurance written by

authorized insurance companies in Florida, except for workers compensation insurance,

medical malpractice insurance, and accident and health insurance.

The FHCF’s ability to borrow is a function of its assessment rates, the size of the

FHCF Assessment Base, and conditions in national and international credit markets. The

assessments levied by the FHCF are called Emergency Assessments (FHCF Emergency

Assessments) but they are not the same as the Citizens’ Emergency Assessments. The

                                                            10 FHCF was created by the Florida Legislature in 1993 as a mandatory reinsurance mechanism for property insurance companies in Florida (Chapter 93-409, Laws of Florida). It provides reimbursement for a portion of an insurance company’s hurricane losses above the company’s required FHCF retention. Insurance companies that write covered policies must enter into a contract with the FHCF and pay an annual premium for the coverage. Since 1995, covered policies have been limited to those providing coverage for personal and commercial residential properties (Chapter 95-276, Laws of Florida). The FHCF is exempt from federal income taxation. Therefore, the FHCF can accumulate premium payments from year to year on a tax-free basis to pay catastrophe losses when they occur. By charging below-market rates, the FHCF has helped hold Florida residential property insurance rates lower than they would have been otherwise. While the Florida Legislature’s principal purposes in establishing the FHCF were to provide additional reinsurance capacity and help stabilize Florida’s property insurance market (Section 215.555(1), Florida Statutes), the beneficial effect of the FHCF charging below-market rates became apparent over time (Committee on Banking and Insurance, 2007). 11 The FHCF is required by statute to charge an “actuarially indicated” premium to insurance companies purchasing FHCF coverage. The FHCF’s traditional approach to developing actuarially indicated rates was to add an administrative cost factor to the average annual hurricane loss estimates developed from a weighted average of several hurricane models. The reasons why the FHCF can comply with the statutory standard and still have rates as much as one third to one fourth of the rates charged by private reinsurance companies are as follows: (1) the FHCF is exempt from federal income taxation; (2) the FHCF has very low administrative expenses; (3) the FHCF has no underwriting or marketing expenses because it is a mandatory insurance program; and (4) the FHCF does not include a profit load or contingency factor in its rates. Finally, the FHCF rates do not recognize its reliance on future debt issues, which will be repaid by Emergency Assessments, to cover large parts of the coverage it provides. 

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Florida Legislature increased the FHCF’s assessment authority during the 2004 Regular

Session by allowing assessments of up to six percent for hurricane losses in one season

and up to an aggregate of ten percent for hurricane losses in multiple years (Chapter

2004-27, Laws of Florida).

FIGA:12 FIGA does not accumulate funds in advance of an insurance company’s

insolvency. Therefore, when an insurance company insolvency occurs, FIGA must

obtain the funds it needs through pro-rata assessments levied by the state insurance

department on insurance companies subject to assessment.13 Depending on the number

and size of property insurance companies that become insolvent following hurricanes

striking Florida in the future, FIGA may need to levy its own FIGA Regular Assessments

and FIGA Emergency Assessments to meet its hurricane claims payment obligations

under Florida law.14

FIGA has three separate accounts (Section 631.55(2), Florida Statutes): (1) the

automobile liability account; (2) the automobile physical damage account; and (3) the

                                                            12 The Florida Legislature joined many other states in 1970 to address concerns about the adverse effects of insolvent insurance companies by creating the Florida Insurance Guaranty Association (Chapter 70-20, Laws of Florida). The purpose of FIGA was to “provide a mechanism for the payment of covered claims under certain insurance policies to avoid excessive delay in payment and to avoid financial loss to claimants or policyholders because of the insolvency of an insurer” (Section 631.51(1), Florida Statutes). 13 Insurance companies may be required to pay these assessments in as little as 30 days. 14 FIGA has the ability to levy two assessments. The first two percent assessment is now called Regular Assessments (FIGA Regular Assessments), while the second two percent assessment is called Emergency Assessments (FIGA Emergency Assessments). The FIGA Regular Assessments “levied against any one insurer shall not exceed in any one year more than 2 percent of that insurer’s net direct written premiums in this state for the kinds of insurance included within such account during the calendar year next preceding the date of such assessments” (Section 631.57(3)(a), Florida Statutes). The FIGA Emergency Assessments can be used to pay hurricane claims directly or be assigned to the governmental unit issuing bonds to assist FIGA so that the governmental unit can “provide for the payment of the principal of, redemption premium, if any, and interest on such bonds, the cost of issuance of such bonds, and the funding of any reserves and other payments required under the bond resolution or trust indenture pursuant to which the bonds have been issued ….” (Section 631.57(3)(e)1.b, Florida Statutes).  

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account for all other insurance required to be part of FIGA.15 Only insurers writing

business in the lines of insurance included in the account in which the insolvent company

was writing business can be assessed. For the purposes of this study, only the ‘all other’

account is relevant since it includes the property insurance lines of business.

Table 1 summarizes the maximum assessments to which two sample households

are subject. Due to the fact that an insured in Citizens is assessed differently than an

insured in the private market, the table shows the potential assessment levels for a Florida

household with homeowners coverage through Citizens and one that is insured by a

private insurer. As shown in the table, a Citizens policyholder could be required to pay

85 percent of their homeowners premium and 54 percent of their auto premium in

assessments in the year following a major hurricane striking Florida. Those assessments

are in addition to the premiums ordinarily paid.

INSERT TABLE 1

Empirical Analysis

The purpose of the analysis is to determine whether and to what extent post-loss subsidies

exist in the post-loss assessment process. We focus on whether the manner in which

deficit assessments imposed on typical Florida policyholders by Citizens, FHCF, and

FIGA creates subsidies. The results provide insight into whether the deficit assessment

procedures set forth in Florida statutes for these entities produce assessments that are fair

and equitable to all policyholders in the state. Given that many states have some element

of post-loss funding of catastrophic losses, the structure of this study can be used to                                                             

15 The ‘all other’ account does not include workers’ compensation. 

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quantify the potential subsidies created by the assessments structures present in other

states.

Data and Summary Information: Our analysis is conducted at the county level using

premium data from the Florida Office of Insurance Regulation (OIR). The sample

contains hurricane, non-hurricane, and full premium data by territory for sample homes.

In addition, data include total policies written both with wind and without wind coverage

for each insurer in each county.16 The initial sample of insurers was based on the data

available from the OIR on their policy premium comparisons website (Florida Office of

Insurance Regulation, 2009). This contained the state’s largest insurers.17 In total, 25

insurers were included in the sample. A listing of these firms can be found in Appendix

A. The firms make up more than 60 percent of the marketplace based on policies in

force, direct premiums written, and exposure. Average premiums are based on an

average for all insurers in the state weighted by policies in force as of the fourth quarter

of 2008.

Table 2 provides summary premium information, reporting the average premium

information for the entire sample as well as separately for Citizens and the private

market. As seen in this table, there is considerable variation in premiums across the state.

                                                            16 The three home types considered were based on a $300,000 new construction home, a $300,000 home constructed prior to 2001 unmitigated, and a $300,000 home constructed prior to 2001 mitigated. We focus on the $300,000 new home as that is the benchmark considered by the OIR. The sample home is a $300,000 home of masonry construction built in 2005. The hurricane deductible selected is two percent and the deductible for all other perils is $500. The protection class is 4. Limits for the coverage types are as follows: Coverage B – 10 percent; Coverage C – 50 percent; Coverage D – 20 percent; Liability - $100,000; Medical Expense $1,000; and Ordinance and Law Coverage – 25 percent. There are no windstorm mitigation credits. The homeowner is 40 years old with no claims history in the last three years and a neutral credit score. Results for the other home types are available upon request. 17 Only insurers in which the territories provided for the insurer could be matched to the appropriate counties were included. USAA is not included in the analysis due to the fact that its insureds are limited to individuals with military affiliations.  

15

Clay, Leon, Duval, Bradford, and Putnam counties have the lowest average total

premiums, ranging from $927 to $1,077. Pasco, Palm Beach, Broward, Dade, and

Monroe counties have the highest average total premiums, ranging from $3,085 to

$4,985. Figure 1 shows the location of each county in the state of Florida.

INSERT TABLE 2

INSERT FIGURE 1

Methodology and Results: As described earlier, the post-loss assessments for Citizens,

FHCF, and FIGA are based on full premium rather than on the hurricane portion of the

premium. To determine if a subsidy exists in the current assessment structure, the

amount that is paid under the current structure is compared to the amount paid under an

assessment structure that is based on hurricane premium. In other words, the difference

between what a policyholder pays under the current assessment structure and what a

policyholder would pay if the assessment structure were based on hurricane risk (called

the hurricane risk-based assessment) is the post-loss subsidy that is being paid by the

policyholder.18

In order to calculate the subsidy, one must recognize the structure that is

legislatively mandated for assessments as well as the potential sources of assessments. In

                                                            18 The hurricane premium paid by each policyholder represents a reported measure of the hurricane risk of each location. The assumption is made that these premiums are accurate and truly reflective of the exposure faced by residents in the county. However, it is possible due to a variety of issues; hurricane and non-hurricane related premiums may not be accurate based on exposures for that county. In other words, pre-loss subsidies may exist due to improper pricing. Due to data constraints and difficulties in determining the true price of hurricane coverage, this issue is not empirically addressed in this study. The issue of pre-loss subsidies is further discussed in the conclusion. 

16

the case of Citizens, Citizens can utilize three different assessments: the Citizens

Policyholder Surcharge, the Citizens Regular Assessments, and the Citizens Emergency

Assessments. Each of these assessments is applied to different assessment bases.

To recover any deficit, Citizens must assess in a particular order, beginning with the

Citizens Policyholder Surcharge. If the Citizens Policyholder Surcharge is not sufficient

to cover the deficit, Citizens must then utilize the Regular Assessments. Finally, if the

combination of the Citizens Policyholder Surcharge and Regular Assessments are not

sufficient to cover the deficit, then Citizens may utilize the Emergency Assessments

(Section 627.351(6)(b)3.d., Florida Statutes). Thus, the Citizens’ assessment income can

originate from five sources:

1. Citizens Policyholder Surcharge

2. Citizens Regular Assessments on Private Homeowners Premiums

3. Citizens Regular Assessments on Non-Homeowners Premiums

4. Citizens Emergency Assessments on Citizens Policyholders and Private

Homeowners Premiums

5. Citizens Emergency Assessments on Non-Homeowners Premiums

In addition to assessments for deficits in any of the Citizens accounts, policyholders also

are subject to assessments from FHCF when a deficit exists. Further, the FIGA

assessment of up to four percent for storm-related deficits must be considered.19

Once the assessment bases are established, we then must recognize the variation

in assessment bases as well as the fact that some of the premiums assessed reflect

                                                            19 Further details related to the calculations for the subsidies created by the structure of the residual market mechanisms are discussed in detail in Appendix B with specific information related to differences in maximum assessments and assessment bases.  

17

hurricane risk (Citizens’ policyholders and private insurers’ homeowners’ policies) and

others do not (automobile insurance premiums and personal umbrella liability coverage).

A priori, there is no expectation that automobile insurance premiums or personal

umbrella liability coverage vary based on differences in hurricane risk exposure across

Florida. Therefore, this analysis assumes that the typical household’s automobile and

umbrella premiums are not hurricane risk based.20 In our analysis, to ensure that the

change from an assessment based on total premium to the hurricane portion of the

premium is revenue neutral, the assessment percentage is increased by the ratio of the

total premiums to hurricane premiums. We also account for the order in which the

assessments are charged after a storm.

Estimates of subsidies for a representative household that may be in the post-loss

assessment structure can be estimated for a variety of deficit scenarios. The

representative household is a household living in a new $300,000 house spending $1,656

per year on personal automobile insurance premiums. Under each of the scenarios, the

subsidies for a representative household in each county are determined as the sum of the

subsidies for the five different components of the Citizens assessments plus the subsidies

paid for the components of the FHCF assessments and the FIGA assessment (see

Appendix B). If the total subsidy dollars are negative, that household is underpaying

relative to the hurricane risk. In other words, it is being subsidized. Alternately, if the

                                                            20 For the purposes of this analysis, the premium paid on an umbrella liability policy is assumed to be $0 since most households do not carry umbrella liability. The $1,656 personal automobile premium is the average premium paid per household measured as the total personal automobile premium paid in the state of Florida in 2007 divided by the number of households in the state. These assumptions could bias the results if auto premiums vary in a systematic way relative to coastal exposure or if personal umbrella coverage buying patterns vary relative to coastal exposure. Although automobile insurance rates are higher in the high risk (hurricane risk) area near Miami, automobile rates are also higher in other urban areas that are not as exposed to hurricane risk, such as Orlando and Jacksonville.  

18

total subsidy dollars are positive, that household is overpaying, or subsidizing other

households.

To better understand both the potential for cross-subsidies and to get an idea of

the magnitude of post-loss assessments, we use two scenarios (see Table 3) with various

combinations of deficits for Citizens, FHCF, and FIGA. The scenarios were constructed

to determine the subsidy levels that would exist based on current assessment structures.

The first deficit scenario for the 1-in-100 year storm was taken from the Financial

Services Commission of the Florida Office of Insurance Regulation (Lovern, 2009). The

second scenario (similar to the losses in the 2004 and 2005 storms combined), which is

reported in Appendix C, involved a $4 billion deficit at Citizens, a $15 billion deficit at

the FHCF, and no deficit at FIGA. For each scenario, two sample households were

evaluated for each county, one with Citizens homeowner’s coverage and one with a

homeowner’s insurance policy from a private insurer. The subsidies reported in the

tables are for the first year of assessments only and ignore any subsequent year

assessments for the two scenarios.21 To provide perspective, the assessments and

subsidies are discussed in relation to median household income for each county.22

INSERT TABLE 3

                                                            21 The subsidies in subsequent years would be lower, since the Citizens assessments would decline after the first year.  22 A list of the median household income for all counties is provided in Appendix C. 

19

The results for the first scenario (1-in-100 year storm) can be found in Table 4

and Figures 2 and 3.23 This scenario evaluates the first year subsidies that would exist if

Citizens faced a $10 billion deficit, FHCF faced a $24 billion deficit, and FIGA had no

deficit due to storms. The results indicate that Citizens could recoup its deficit by

charging the full Citizens Policyholder Surcharge (45 percent), the full Regular

Assessment (18 percent), and an Emergency Assessment (8.65 percent) in year 1. The

FHCF would need to charge six percent for 23 years to recoup its deficit.

As shown in Table 4, the highest subsidy paid on a percentage basis by the

representative household of private insurers, more than 25 percent, would occur in Baker

County while the highest subsidy paid on a dollar basis, more than $700, would occur in

Polk County. For the representative household of Citizens policyholders, the largest

subsidy paid on a percentage basis (more than 33 percent) would occur in Hamilton

County while the largest subsidy paid on a dollar basis ($1,322.87) would occur in Polk

County.

The county receiving the highest subsidy by any measure (on both the percentage

and dollar basis, and for both Citizens and private insurers) is Monroe County. In this

county, a representative household of private insurers would receive a subsidy of over

$1,450, or more than 27 percent of total premiums ($1,750 and 25 percent for Citizens).

Figures 2 and 3 show maps of the top counties paying and receiving subsidies for

Citizens and the private market, respectively. Generally, the counties receiving subsidies

are coastal while those paying subsidies are inland.

                                                            23 Note that the same counties are paying and receiving subsidies with the small storm scenario. However, the magnitude of the subsidies varies. These results appear in Appendix D.  

20

INSERT TABLE 4

INSERT FIGURES 2 AND 3

While the size of assessments and subsidies is important, they must be taken in

context to consider the potential impact on homeowners. For example, in counties such

as Monroe, the post-loss assessments are currently as high as $3,688. The potential risk-

based assessment would be even higher at $5,415. In 2008, the average household

income in Monroe County was $45,085. This means that under the current structure, the

assessment represents eight percent of household income. Under the risk-based

approach, the assessment would increase to 12 percent.

In terms of subsidies, a representative household in Polk County pays the largest

subsidy on a dollar basis for both Citizens and the private market. The subsidies of

$1,323 for Citizens and $706 for the private market represent more than three percent and

slightly less than two percent of median household income, respectively. However, in

some of the lower income counties, the percentages can be higher. For example, in

Hamilton County, the county with the lowest median household income, subsidies for

Citizens and the private market represent 4.5 percent and 2.5 percent of income,

respectively.

DISCUSSION, CONCLUSIONS, AND FUTURE RESEARCH

This paper provides a discussion of the advantages and disadvantages of the use of post-

loss financing options to fund hurricane-related losses. In addition, the study uses Florida

as an example to illustrate the impact of post-loss assessments on homeowners. The

21

empirical analysis highlights several key areas of the public policy debate, including: 1)

the impact of a more risk-based structure on assessments; 2) the potential need to better

balance between pre-loss and post-loss financing; and 3) the viability of post-loss

financing. First, the study finds that a subsidy is created due to the fact that assessments

are not risk based. If a more risk-based approach were utilized, such as the formula based

on the wind portion of the premium (or relative wind rate), at least a portion of the

subsidy could be removed. However, this approach still assumes that the wind rates by

county provide a sound proxy for the relative hurricane risk. It also implies that the

overall premium structure for the non-wind portions is truly independent in pricing for

the wind risk. These issues would need to be addressed to truly create a risk-based

assessment process. Also, while a risk-based assessment has the advantage of being

more equitable, it is not without costs. For example, to the extent that the current

structure encourages development and property ownership in subsidized areas, the net

effect of moving to a risk-based approach may not be positive.

A second area of consideration is the appropriate mix of pre- and post-loss

financing. This is highlighted by the potential scope of post-loss assessments. As

mentioned above, in some counties, the projected assessment might be as high as 12

percent of the median household income in the county. The assessment issue is further

compounded given that this study only examines the impact of a single storm year’s

worth of assessments. In the case of storms in multiple years, the number and amount of

assessments could be much greater. As such, the question remains of whether heavily

relying on post-loss financing is viable. More specifically, the optimal solution for states

may be to utilize different combinations of pre- and post-loss financing.

22

Additionally, consideration should be given to the level of participation of state-

run entities. For example, in Florida’s current structure, the FHCF provides reinsurance

protection at a fairly low attachment level. Future research on the capacity of the

property insurance market is needed to determine if this is an appropriate level of

attachment. Similarly, the question of whether states should provide all peril coverage or

wind-only policies also is important.

Another area of concern is the viability of post-loss assessment structures. More

specifically, the economic impact of assessments on homeowners and the degree to

which the assessments create subsidies should be considered. As shown in the case of

Florida, assessments can represent a substantial percent of median household income. As

such, states must consider the economic impact as well as potential changes in insurance

buying behavior by those affected. This includes not just homeowners, but the impact on

the real estate market, residential and commercial development, and the tax base. Also, if

the state elects to use a method of assessment that is not risk-based, it would need to

consider the impact of the subsidies on homeowners in the state. Some have suggested

that more transparent methods of subsidies such as a means tested voucher system could

be used (Wharton Risk Management and Decision Processes Center, 2008). This system

would provide a more target means of subsidies.

Another area of concern may be the ability of state-run entities to issue the bonds

needed to pay claims in a timely manner following a catastrophe. This was a concern in

Florida with Citizens and the FHCF during the 2008 hurricane season as the capital

markets tightened during the credit crisis (Estimated FHCF Claims Paying Capacity,

23

2008). While still a concern in the current market, the ability to bond has increased in

recent months.

Finally, states must consider the impact of the financing structure on the insurance

market. For example, over time, the Florida homeowners’ insurance market has seen an

increase in the number of smaller firms entering the marketplace combined with an

increase in the size of the residual market. This has raised concerns of increased

insolvency risk in the marketplace in the event of a major storm (Nyce, Schneider and

Karl, 2009).

To date, this study provides the first quantification of the magnitude of the

potential subsidies created by post-loss financing. While the current structure in Florida

may be useful in controlling the cost of homeowners insurance, it appears that the post-

loss financing structure in place serves to reduce premiums in the highest risk coastal

areas and spread the risk over all Florida citizens. This paper provides the basis for

future research relate to the economic impact of subsidies in the insurance area as well as

the viability and capacity of the property insurance markets. For example, an

examination of the demographic and political factors that affect subsidies may help to

understand both the true impact of the subsidies on individuals as well as the political and

societal factors that contribute to the existence of subsidies. Further, information on the

potential scope of the post-loss assessments is an important component of the discussion

related to the capacity of property insurance markets.

While Florida is used as a case example, the results of the study would be of

interest to other states faced with the issue of how to adequately fund catastrophic storm

exposure by providing a method by which the potential outcome of those decisions can

24

be quantified. This information could be useful to states in evaluating and comparing

different methods to finance catastrophic storm risk. Given the high exposure faced by

some states and potentially large costs associated with hurricane losses, these issues are

important to a variety of stakeholders, including insureds, insurers, reinsurers,

policyholders, and legislatures.

25

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Cummins, J. David (2006) “Should the Government Provide Insurance for

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www.shopandcomparerates.com accessed January 2009. Foster, Vivien, Andrés Gόmez-Lobo, and Jonathan Halpern (2000) “Designing Direct

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Nyce, Charles, Lorilee Schneider and Brad Karl, (2009) “Who’s Gonna Pay When My

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29

Table 1: Summary of Maximum Assessments

Panel A: Household #1 - Citizens

Policies Held: Citizens' HO Policy Personal Auto Policies Personal Umbrella Liability Policy Potential Assessments Citizens Policyholder Surcharge Citizens Regular Assessment Citizens Regular Assessment Citizens Emergency Assessment Citizens Emergency Assessment Citizens Emergency Assessment FHCF Emergency Assessment FHCF Emergency Assessment FHCF Emergency Assessment FIGA Regular Assessment FIGA Regular Assessment FIGA Emergency Assessment FIGA Emergency Assessment Likely Maximum Assessment (as a percentage of premium on the policy) Year 1 85% (Citizens - 75%, FHCF- 6%, FIGA - 4%) 54% (Citizens - 48%, FHCF - 6%) 58% (Citizens - 48%, FHCF - 6%, FIGA - 4%) Year 2+ 40% (Citizens - 30%, FHCF - 6%, FIGA - 4%) 36% (Citizens - 30%, FHCF - 6%) 40% (Citizens - 30%, FHCF - 6%, FIGA - 4%) Panel B: Household #2 - Private Homeowners' Policy

Policies Held: Private Insurer's HO Policy Personal Auto Policies Personal Umbrella Liability Policy Potential Assessments Citizens Regular Assessment Citizens Regular Assessment Citizens Regular Assessment Citizens Emergency Assessment Citizens Emergency Assessment Citizens Emergency Assessment FHCF Emergency Assessment FHCF Emergency Assessment FHCF Emergency Assessment FIGA Regular Assessment FIGA Regular Assessment FIGA Emergency Assessment FIGA Emergency Assessment Likely Maximum Assessment (as a percentage of premium on the policy) Year 1 58% (Citizens - 48%, FHCF- 6%, FIGA - 4%) 54% (Citizens - 48%, FHCF - 6%) 58% (Citizens - 48%, FHCF - 6%, FIGA - 4%) Year 2+ 40% (Citizens - 30%, FHCF - 6%, FIGA - 4%) 36% (Citizens - 30%, FHCF - 6%) 40% (Citizens - 30%, FHCF - 6%, FIGA - 4%)

30

Table 2: Average Hurricane, Non-hurricane, and Total Premiums for the Private

Market and Citizens – Newly Constructed $300,000 Home24

Hurricane Premiums Non-hurricane Premiums Total Premiums County All Private Citizens All Private Citizens All Private Citizens Alachua $ 289 $ 280 $ 395 $ 855 $ 820 $ 1,266 $ 1,143 $ 1,099 $ 1,661 Baker $ 222 $ 189 $ 425 $ 928 $ 836 $ 1,479 $ 1,150 $ 1,025 $ 1,904 Bay $ 1,288 $ 1,115 $ 1,746 $ 966 $ 824 $ 1,343 $ 2,255 $ 1,940 $ 3,089 Bradford $ 253 $ 220 $ 428 $ 809 $ 683 $ 1,468 $ 1,062 $ 903 $ 1,896 Brevard $ 1,268 $ 1,241 $ 1,377 $ 769 $ 705 $ 1,031 $ 2,037 $ 1,946 $ 2,407 Broward $ 2,330 $ 2,234 $ 2,445 $ 974 $ 833 $ 1,144 $ 3,305 $ 3,067 $ 3,589 Calhoun $ 437 $ 438 $ 436 $ 818 $ 689 $ 1,426 $ 1,256 $ 1,127 $ 1,862 Charlotte $ 1,302 $ 1,287 $ 1,337 $ 789 $ 731 $ 928 $ 2,091 $ 2,018 $ 2,265 Citrus $ 652 $ 587 $ 1,086 $ 895 $ 858 $ 1,149 $ 1,547 $ 1,445 $ 2,235 Clay $ 235 $ 226 $ 374 $ 692 $ 658 $ 1,218 $ 927 $ 884 $ 1,592 Collier $ 1,731 $ 1,652 $ 2,077 $ 834 $ 768 $ 1,123 $ 2,565 $ 2,420 $ 3,200 Columbia $ 225 $ 197 $ 405 $ 897 $ 818 $ 1,421 $ 1,121 $ 1,015 $ 1,826 Dade $ 2,790 $ 2,453 $ 3,024 $ 1,336 $ 1,050 $ 1,534 $ 4,126 $ 3,503 $ 4,558 DeSoto $ 659 $ 604 $ 902 $ 737 $ 652 $ 1,115 $ 1,395 $ 1,256 $ 2,017 Dixie $ 785 $ 583 $ 980 $ 876 $ 671 $ 1,075 $ 1,661 $ 1,254 $ 2,054 Duval $ 383 $ 373 $ 533 $ 671 $ 645 $ 1,024 $ 1,054 $ 1,018 $ 1,557 Escambia $ 1,446 $ 1,357 $ 1,771 $ 837 $ 695 $ 1,354 $ 2,283 $ 2,052 $ 3,124 Flagler $ 576 $ 544 $ 773 $ 599 $ 573 $ 760 $ 1,176 $ 1,117 $ 1,533 Franklin $ 1,796 $ 1,298 $ 2,266 $ 1,214 $ 832 $ 1,575 $ 3,010 $ 2,130 $ 3,841 Gadsden $ 391 $ 398 $ 371 $ 857 $ 749 $ 1,193 $ 1,248 $ 1,147 $ 1,564 Gilchrist $ 308 $ 254 $ 399 $ 973 $ 809 $ 1,249 $ 1,281 $ 1,064 $ 1,648 Glades $ 772 $ 662 $ 1,079 $ 705 $ 634 $ 904 $ 1,477 $ 1,296 $ 1,983 Gulf $ 1,490 $ 1,091 $ 1,849 $ 1,147 $ 765 $ 1,491 $ 2,637 $ 1,856 $ 3,340 Hamilton $ 240 $ 189 $ 461 $ 968 $ 819 $ 1,615 $ 1,207 $ 1,007 $ 2,076 Hardee $ 580 $ 546 $ 900 $ 702 $ 657 $ 1,122 $ 1,282 $ 1,202 $ 2,022 Hendry $ 794 $ 717 $ 1,071 $ 686 $ 617 $ 930 $ 1,480 $ 1,334 $ 2,001 Hernando $ 960 $ 765 $ 1,151 $ 1,536 $ 1,993 $ 1,088 $ 2,495 $ 2,758 $ 2,238 Highlands $ 592 $ 573 $ 777 $ 700 $ 667 $ 1,014 $ 1,292 $ 1,240 $ 1,791 Hillsborough $ 744 $ 708 $ 876 $ 1,591 $ 1,590 $ 1,592 $ 2,335 $ 2,298 $ 2,468 Holmes $ 337 $ 320 $ 395 $ 909 $ 824 $ 1,199 $ 1,247 $ 1,144 $ 1,594 Indian River $ 1,956 $ 1,794 $ 2,593 $ 697 $ 588 $ 1,129 $ 2,653 $ 2,382 $ 3,721 Jackson $ 437 $ 449 $ 373 $ 750 $ 668 $ 1,188 $ 1,187 $ 1,117 $ 1,561 Jefferson $ 505 $ 461 $ 768 $ 767 $ 681 $ 1,275 $ 1,272 $ 1,142 $ 2,043 Lafayette $ 343 $ 310 $ 421 $ 986 $ 775 $ 1,485 $ 1,329 $ 1,085 $ 1,906 Lake $ 303 $ 289 $ 439 $ 864 $ 813 $ 1,383 $ 1,167 $ 1,102 $ 1,822 Lee $ 1,315 $ 1,309 $ 1,333 $ 842 $ 795 $ 971 $ 2,157 $ 2,104 $ 2,303 Leon $ 273 $ 265 $ 350 $ 670 $ 624 $ 1,145 $ 943 $ 889 $ 1,495 Levy $ 686 $ 508 $ 913 $ 768 $ 661 $ 904 $ 1,454 $ 1,168 $ 1,817 Liberty $ 420 $ 389 $ 500 $ 979 $ 735 $ 1,590 $ 1,399 $ 1,124 $ 2,090 Madison $ 374 $ 366 $ 411 $ 826 $ 691 $ 1,407 $ 1,200 $ 1,057 $ 1,818 Manatee $ 1,318 $ 1,285 $ 1,403 $ 853 $ 796 $ 1,002 $ 2,170 $ 2,081 $ 2,405 Marion $ 287 $ 276 $ 402 $ 848 $ 808 $ 1,268 $ 1,135 $ 1,084 $ 1,670 Martin $ 1,984 $ 1,854 $ 2,576 $ 632 $ 565 $ 938 $ 2,617 $ 2,420 $ 3,513 Monroe $ 3,841 $ 3,091 $ 3,998 $ 1,144 $ 654 $ 1,246 $ 4,985 $ 3,745 $ 5,244 Nassau $ 529 $ 430 $ 881 $ 708 $ 630 $ 982 $ 1,237 $ 1,060 $ 1,863

                                                            24 Premium tables for older homes (mitigated and unmitigated) are available from the authors. 

31

Okaloosa $ 1,387 $ 1,320 $ 1,760 $ 872 $ 789 $ 1,336 $ 2,258 $ 2,108 $ 3,096 Okeechobee $ 740 $ 658 $ 1,050 $ 700 $ 622 $ 996 $ 1,440 $ 1,280 $ 2,046 Orange $ 334 $ 331 $ 423 $ 932 $ 911 $ 1,428 $ 1,266 $ 1,242 $ 1,851 Osceola $ 346 $ 345 $ 355 $ 844 $ 818 $ 1,296 $ 1,190 $ 1,163 $ 1,651 Palm Beach $ 2,395 $ 2,411 $ 2,365 $ 782 $ 703 $ 931 $ 3,177 $ 3,114 $ 3,295 Pasco $ 1,341 $ 955 $ 1,718 $ 1,744 $ 1,977 $ 1,516 $ 3,085 $ 2,932 $ 3,234 Pinellas $ 1,233 $ 1,213 $ 1,259 $ 1,096 $ 976 $ 1,245 $ 2,329 $ 2,189 $ 2,504 Polk $ 487 $ 479 $ 557 $ 1,496 $ 1,438 $ 1,988 $ 1,983 $ 1,917 $ 2,545 Putnam $ 274 $ 247 $ 367 $ 803 $ 692 $ 1,181 $ 1,077 $ 939 $ 1,548 Santa Rosa $ 1,369 $ 1,269 $ 1,829 $ 920 $ 818 $ 1,389 $ 2,289 $ 2,087 $ 3,218 Sarasota $ 1,230 $ 1,186 $ 1,298 $ 814 $ 751 $ 911 $ 2,044 $ 1,936 $ 2,208 Seminole $ 332 $ 331 $ 378 $ 928 $ 911 $ 1,441 $ 1,260 $ 1,242 $ 1,819 St. Johns $ 548 $ 519 $ 778 $ 573 $ 548 $ 782 $ 1,121 $ 1,067 $ 1,560 St. Lucie $ 1,891 $ 1,737 $ 2,537 $ 698 $ 595 $ 1,127 $ 2,589 $ 2,331 $ 3,664 Sumter $ 282 $ 274 $ 399 $ 868 $ 842 $ 1,250 $ 1,150 $ 1,116 $ 1,649 Suwannee $ 414 $ 388 $ 515 $ 907 $ 686 $ 1,765 $ 1,321 $ 1,074 $ 2,280 Taylor $ 634 $ 524 $ 1,040 $ 754 $ 638 $ 1,184 $ 1,389 $ 1,162 $ 2,224 Union $ 261 $ 222 $ 414 $ 922 $ 775 $ 1,501 $ 1,183 $ 997 $ 1,915 Volusia $ 825 $ 785 $ 943 $ 671 $ 603 $ 873 $ 1,496 $ 1,388 $ 1,815 Wakulla $ 991 $ 872 $ 1,216 $ 838 $ 669 $ 1,159 $ 1,829 $ 1,542 $ 2,374 Walton $ 1,414 $ 1,055 $ 1,836 $ 1,072 $ 781 $ 1,415 $ 2,485 $ 1,836 $ 3,250 Washington $ 418 $ 394 $ 508 $ 951 $ 790 $ 1,572 $ 1,369 $ 1,184 $ 2,080

32

Figure 1: Counties in the State of Florida

33

Table 3: Deficit Scenarios

Scenario Citizens Deficit25 FHCF Deficit FIGA Deficit

Scenario #1: 1-in-100 Year

Storm

$10 billion $24 billion $0

Scenario #2: Combined Losses similar to 2004 &

2005 Storms

$4 billion $15 billion $0

                                                            25 The Citizens deficit is assumed to be a combined deficit of all three accounts with all three having deficits. 

34

Table 4A: Post-Loss Assessment Structure: Counties Receiving Subsidies

Scenario #1- Private Insurer Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Brevard $1,175.99 $1,195.63 ($19.65) -0.55% Broward $1,542.17 $2,170.88 ($628.71) -13.31% Charlotte $1,199.60 $1,234.70 ($35.10) -0.96% Collier $1,330.97 $1,608.46 ($277.49) -6.81% Dade $1,684.40 $2,473.09 ($788.70) -15.29%

Escambia $1,210.68 $1,330.73 ($120.05) -3.24% Franklin $1,236.04 $1,432.61 ($196.56) -5.19%

Gulf $1,146.66 $1,196.55 ($49.89) -1.42% Indian River $1,318.39 $1,775.89 ($457.50) -11.33%

Lee $1,227.72 $1,252.60 ($24.88) -0.66% Manatee $1,220.01 $1,239.66 ($19.65) -0.53% Martin $1,330.68 $1,821.22 ($490.54) -12.04% Monroe $1,763.51 $3,242.30 ($1,478.80) -27.38%

Okaloosa $1,228.98 $1,286.13 ($57.15) -1.52% Palm Beach $1,557.25 $2,296.13 ($738.88) -15.49% Santa Rosa $1,222.20 $1,250.89 ($28.69) -0.77% St. Lucie $1,301.92 $1,718.38 ($416.47) -10.44% Walton $1,140.12 $1,146.54 ($6.42) -0.18%

35

Table 4B: Post-Loss Assessment Structure: Counties Paying Subsidies Scenario #1- Private Insurer Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Alachua $899.63 $270.57 $629.06 22.83% Baker $875.29 $193.19 $682.10 25.44% Bay $1,173.97 $1,131.99 $41.98 1.17%

Bradford $835.54 $222.89 $612.65 23.94% Calhoun $908.54 $417.95 $490.59 17.63% Citrus $1,012.43 $585.64 $426.79 13.76% Clay $829.36 $219.30 $610.06 24.02%

Columbia $872.13 $199.08 $673.05 25.20% DeSoto $950.62 $597.93 $352.68 12.11% Dixie $950.19 $635.08 $315.11 10.83% Duval $873.13 $360.08 $513.05 19.19% Flagler $905.26 $531.98 $373.28 13.46%

Gadsden $915.31 $377.50 $537.81 19.18% Gilchrist $887.95 $263.82 $624.12 22.95% Glades $963.93 $674.87 $289.06 9.79%

Hamilton $869.61 $200.07 $669.53 25.14% Hardee $933.27 $534.43 $398.84 13.95% Hendry $976.31 $714.68 $261.63 8.75%

Hernando $1,441.14 $806.04 $635.10 14.39% Highlands $945.54 $554.42 $391.12 13.51%

Hillsborough $1,291.02 $689.89 $601.13 15.20% Holmes $914.22 $312.64 $601.58 21.48% Jackson $905.28 $423.82 $481.47 17.36%

Jefferson $913.57 $457.04 $456.53 16.32% Lafayette $894.97 $309.04 $585.93 21.38%

Lake $900.47 $281.40 $619.07 22.45% Leon $831.10 $256.11 $574.99 22.59% Levy $922.18 $554.05 $368.13 13.03%

Liberty $907.63 $383.49 $524.13 18.85% Madison $885.81 $352.52 $533.29 19.66% Marion $894.52 $267.93 $626.59 22.87% Nassau $886.80 $448.95 $437.85 16.12%

Okeechobee $958.48 $659.97 $298.51 10.17% Orange $946.15 $317.08 $629.07 21.71% Osceola $920.56 $330.09 $590.47 20.94% Pasco $1,498.10 $1,061.57 $436.53 9.51%

Pinellas $1,255.24 $1,166.02 $89.22 2.32% Polk $1,166.69 $460.64 $706.06 19.76%

Putnam $847.24 $246.05 $601.19 23.17% Sarasota $1,172.89 $1,149.39 $23.51 0.65%

36

Seminole $946.14 $316.52 $629.62 21.73% St. Johns $889.13 $507.04 $382.09 14.03% Sumter $904.97 $264.83 $640.13 23.10%

Suwannee $891.23 $380.52 $510.71 18.71% Taylor $920.20 $543.26 $376.94 13.37% Union $866.25 $227.34 $638.91 24.08%

Volusia $993.83 $764.92 $228.91 7.52% Wakulla $1,043.98 $878.86 $165.13 5.16%

Washington $927.37 $385.46 $541.91 19.08%

37

Table 4C: Post-Loss Assessment Structure: Counties Receiving Subsidies

Scenario #1- Citizens Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Broward $2,681.52 $3,304.82 ($623.30) -11.88% Collier $2,449.19 $2,710.46 ($261.28) -5.38% Dade $3,259.65 $4,051.82 ($792.17) -12.75%

Franklin $2,831.84 $2,921.88 ($90.04) -1.64% Indian River $2,760.26 $3,304.35 ($544.09) -10.12%

Martin $2,636.19 $3,298.79 ($662.60) -12.82% Monroe $3,668.43 $5,414.77 ($1,746.34) -25.31%

Palm Beach $2,506.15 $3,250.35 ($744.20) -15.03% St. Lucie $2,725.96 $3,224.38 ($498.42) -9.37%

38

Table 4D: Post-Loss Assessment Structure: Counties Paying Subsidies

Scenario #1- Citizens Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Alachua $1,531.47 $499.87 $1,031.60 31.10% Baker $1,676.42 $503.64 $1,172.78 32.94% Bay $2,383.27 $2,214.20 $169.07 3.56%

Bradford $1,671.65 $518.55 $1,153.10 32.46% Brevard $1,976.46 $1,843.32 $133.14 3.28% Calhoun $1,651.37 $597.76 $1,053.61 29.95% Charlotte $1,891.76 $1,817.61 $74.15 1.89%

Citrus $1,873.86 $1,319.31 $554.55 14.25% Clay $1,490.31 $458.41 $1,031.90 31.77%

Columbia $1,629.89 $484.88 $1,145.02 32.88% DeSoto $1,743.82 $1,141.27 $602.56 16.41% Dixie $1,765.90 $1,266.30 $499.60 13.47% Duval $1,469.24 $671.78 $797.46 24.82%

Escambia $2,404.15 $2,299.57 $104.58 2.19% Flagler $1,454.82 $982.18 $472.64 14.82%

Gadsden $1,473.61 $516.06 $957.55 29.74% Gilchrist $1,523.72 $511.34 $1,012.37 30.64% Glades $1,723.54 $1,358.99 $364.56 10.02% Gulf $2,532.70 $2,393.65 $139.04 2.78%

Hamilton $1,779.02 $545.78 $1,233.24 33.05% Hardee $1,746.81 $1,108.91 $637.90 17.34% Hendry $1,734.28 $1,359.84 $374.45 10.24%

Hernando $1,875.65 $1,501.98 $373.67 9.60% Highlands $1,609.02 $992.61 $616.41 17.88%

Hillsborough $2,012.85 $1,148.70 $864.15 20.95% Holmes $1,491.51 $518.76 $972.75 29.93% Jackson $1,471.82 $535.55 $936.27 29.10%

Jefferson $1,759.04 $950.08 $808.95 21.87% Lafayette $1,677.61 $546.50 $1,131.11 31.76%

Lake $1,627.51 $548.52 $1,078.98 31.02% Lee $1,914.42 $1,818.48 $95.95 2.42%

Leon $1,432.45 $449.43 $983.02 31.20% Levy $1,624.52 $1,162.82 $461.71 13.29%

Liberty $1,787.37 $654.04 $1,133.33 30.25% Madison $1,625.12 $548.69 $1,076.43 30.99% Manatee $1,974.97 $1,888.61 $86.35 2.13% Marion $1,536.84 $506.13 $1,030.71 30.99% Nassau $1,651.96 $1,070.46 $581.51 16.52%

Okaloosa $2,387.15 $2,266.08 $121.07 2.55%

39

Okeechobee $1,761.12 $1,318.14 $442.98 11.97% Orange $1,644.51 $544.52 $1,099.99 31.37% Osceola $1,525.51 $482.74 $1,042.76 31.53% Pasco $2,469.77 $2,207.02 $262.74 5.37%

Pinellas $2,034.32 $1,714.14 $320.18 7.70% Polk $2,058.78 $735.90 $1,322.87 31.49%

Putnam $1,464.07 $466.63 $997.44 31.13% Santa Rosa $2,459.92 $2,327.19 $132.74 2.72%

Sarasota $1,857.76 $1,751.02 $106.74 2.76% Seminole $1,625.72 $500.07 $1,125.65 32.39% St. Johns $1,471.22 $976.49 $494.73 15.38% Sumter $1,524.31 $501.22 $1,023.09 30.96%

Suwannee $1,900.70 $666.28 $1,234.42 31.36% Taylor $1,867.00 $1,267.40 $599.61 15.46% Union $1,682.98 $507.89 $1,175.09 32.91%

Volusia $1,623.33 $1,245.35 $377.98 10.89% Wakulla $1,956.78 $1,577.89 $378.88 9.40% Walton $2,479.31 $2,350.71 $128.60 2.62%

Washington $1,781.40 $660.79 $1,120.62 30.00%

40

41

42

Appendix A: Private Insurance Companies Used in the Study

Allstate Florida Insurance Company First Floridian Insurance Company

Tower Hill Select Insurance Company Florida Farm Bureau Casualty Insurance Company

People’s Trust Homeowners Insurance Homewise Preferred Insurance Company

Edison Insurance Company Tower Hill Prime Insurance Company

Tower Hill Preferred Insurance Company State Farm Florida Insurance Company

American Traditions Insurance Company Florida Peninsula Insurance Company

Southern Oak Insurance Company Universal Property & Casualty Insurance Company

Liberty Mutual Fire Insurance Company ASI Assurance Corporation

St. Johns Insurance Company, Inc. Olympus Insurance Company

Southern Fidelity Insurance Company Universal Insurance Company of North America

Auto Club Insurance Company of Florida Security First Insurance Company

United Property & Casualty Insurance Company, Inc. Royal Palm Insurance Company

Avatar Insurance

43

Appendix B: Calculation of Post-Loss Assessments

Citizens Subsidy: Citizens can utilize three different assessments: the Citizens

Policyholder Surcharge, the Citizens Regular Assessments, and the Citizens Emergency

Assessments. Each of these assessments is applied to different assessment bases.

To recover any deficit, Citizens must assess in a particular order, beginning with the

Citizens Policyholder Surcharge. If the Citizens Policyholder Surcharge is not sufficient to

cover the deficit, Citizens must then utilize the Regular Assessments. Finally, if the

combination of the Citizens Policyholder Surcharge and Regular Assessments are not

sufficient to cover the deficit, then Citizens may utilize the Emergency Assessments

(Section 627.351(6)(b)3.d., Florida Statutes). Citizens assessment income can originate

from five sources:

Source #1 – Citizens Policyholder Surcharge:26 While the total premium paid on

Citizens policies does reflect hurricane risk, it is not solely based on that risk. A more

hurricane risk-based assessment could be structured by assessing only the hurricane portion

of the premium, rather than the total premium. To ensure that the change from an

assessment based on total premium to the hurricane portion of the premium is revenue

neutral, the assessment percentage is increased by the ratio of Citizens total premiums to

Citizens hurricane premiums. This ratio is approximately 1.627 (based on premiums and

premium volume as of December 2008). This indicates that approximately 61 cents of

every dollar collected by Citizens is hurricane premium (1/1.627). Using this ratio implies

that Citizens would need to impose an assessment of 73.2 percent (ratio of 1.627 times

maximum assessment of 45 percent) on the hurricane portion of the premium to collect the

                                                            26 As discussed earlier, when Citizens faces a deficit in any of its three accounts, the first assessment is the Citizens Policyholder Surcharge. This surcharge can be up to 15 percent of the total premium paid on Citizens policies for each account or 45 percent in aggregate. 

44

same aggregate dollars as assessing 45 percent on total Citizens premiums. Therefore, the

new Citizens Policyholder Surcharge, or hurricane risk-based assessment, is up to 73.2

percent of hurricane premiums paid on Citizens’ policies.

Source #2 – Citizens Regular Assessments on Private Insurer Homeowners

Premiums:27 As with the assessment made to Citizens policyholders, to ensure that the

change from an assessment based on full premium to the hurricane portion of the premium

is revenue neutral with policyholders in the private market, the assessment percentage must

be increased by the ratio of private insurer’s homeowners total premiums to private

insurer’s homeowners hurricane premiums, which is approximately 1.765. This indicates

that approximately 57 cents of every dollar collected by private insurers is hurricane

premium (1/1.765). Using this ratio implies that Citizens would need to impose an

assessment of 31.8 percent (ratio of 1.765 times maximum assessment of 18 percent) on

the hurricane portion of the premium to collect the same aggregate dollars as assessing 18

percent on the total premium.

Source #3 – Citizens Regular Assessments on Non-Homeowners Premiums:

The hurricane risk-based assessment is obtained by multiplying the current assessment by

the relative hurricane risk as measured by the ratio of the county’s average hurricane

premium to the weighted statewide average hurricane premium.

Source #4 – Citizens Emergency Assessments on Citizens Policyholders and

Private Homeowners Premiums: Using the same methodology as the Citizens

Policyholder Surcharge and the homeowners’ portion of the Regular Assessments, the ratio

of total premiums paid for both Citizens and private insurers homeowners’ coverage to the

hurricane portion of those premiums is used to adjust the assessment from its current                                                             

 

45

structure. Recall, with the current assessment structure, up to 30 percent of total premium

paid on Citizens policyholders and private homeowners premiums can be assessed. Using

the Citizens ratio of 1.627, and the private insurance ratio of 1.765 the hurricane risk-based

assessment is up to an aggregate of 51.2 percent of hurricane premium paid on Citizens

policyholders and private homeowners premiums.

Source #5 – Citizens Emergency Assessments on Non-Homeowners Premiums:

Finally, the current Emergency Assessment on non-homeowners’ premiums is up to 30

percent of total premium paid on non-homeowners premiums in the assessment base. The

hurricane risk-based assessment is obtained by multiplying the current assessment by the

relative hurricane risk (same as Source #3).

FHCF Subsidy: In addition to assessments for deficits in any of the Citizens accounts,

policyholders also are subject to assessments from FHCF when a deficit exists. The same

methodology used to reweight the assessments and calculate the subsidies in the Citizen

Emergency Assessments is used for the FHCF Emergency Assessments. Specifically, for

the homeowners’ portion of the FHCF Emergency Assessments, the ratio of total

premiums paid for both Citizens and private insurers homeowners’ coverage to the

hurricane portion of those premiums is used to adjust the assessment from its current

structure of up to six percent of total premium paid on Citizens policyholders and private

homeowners premiums to a hurricane risk-based assessment.

FIGA Subsidy: The FIGA assessment base does not include private passenger automobile

premiums. As such, for the representative household, the only assessable insurance policy

46

would be the homeowner’s policy. FIGA can assess up to four percent for storm-related

deficits. The ratio of total premiums paid for both Citizens and private insurance

homeowner’s coverage to the hurricane portion of those premiums is used to adjust the

assessment from its current structure of up to four percent of total premium paid on

Citizens policyholders and private homeowner’s premiums to a hurricane risk-based

assessment.

47

Appendix C: Median Household Income by County (2008)

County Median HH

Income County Median HH

Income Alachua $ 36,029 Lee $ 43,705 Baker $ 39,475 Leon $ 41,115 Bay $ 37,490 Levy $ 28,021 Bradford $ 34,316 Liberty $ 30,800 Brevard $ 42,723 Madison $ 28,672 Broward $ 46,604 Manatee $ 42,706 Calhoun $ 27,977 Marion $ 34,036 Charlotte $ 38,262 Martin $ 48,306 Citrus $ 33,187 Miami-Dade $ 40,996 Clay $ 50,626 Monroe $ 45,085 Collier $ 51,482 Nassau $ 48,867 Columbia $ 32,235 Okaloosa $ 43,953 DeSoto $ 31,295 Okeechobee $ 32,557 Dixie $ 27,171 Orange $ 44,501 Duval $ 43,890 Osceola $ 39,516 Escambia $ 37,389 Palm Beach $ 50,490 Flagler $ 40,367 Pasco $ 36,446 Franklin $ 28,059 Pinellas $ 40,708 Gadsden $ 32,786 Polk $ 38,341 Gilchrist $ 30,672 Putnam $ 30,015 Glades $ 32,942 St. Johns $ 57,638 Gulf $ 31,242 St. Lucie $ 37,777 Hamilton $ 27,145 Santa Rosa $ 43,968 Hardee $ 31,889 Sarasota $ 45,583 Hendry $ 34,421 Seminole $ 53,351 Hernando $ 34,576 Sumter $ 32,869 Highlands $ 30,448 Suwannee $ 31,371 Hillsborough $ 44,657 Taylor $ 32,047 Holmes $ 28,637 Union $ 35,385 Indian River $ 45,691 Volusia $ 37,500 Jackson $ 31,220 Wakulla $ 38,724 Jefferson $ 36,087 Walton $ 35,706 Lafayette $ 30,061 Washington $ 28,886 Lake $ 38,230

48

Appendix D: Small Storms Scenario Results

Under this scenario, the Citizens deficit can be recouped with the Policyholders

Surcharge (45 percent) and a Regular Assessment (8.41 percent).28 The FHCF deficit

would be recouped with 11 years of Emergency Assessments at the maximum six percent

rate. Under the first scenario, private insurer policyholders in 18 counties would receive

first-year subsidies and policyholders in 49 counties would pay subsidies.29 The highest

subsidy paid on a percentage basis by private insurer policyholders would occur in Baker

County, where the representative household would pay a subsidy of over 11 percent of

total premiums (homeowner’s and non-homeowner’s premiums). The highest subsidy paid

on a dollar basis by private insurer policyholders would occur in Polk County, where the

representative household would pay a subsidy of more than $300. The highest first-year

subsidy paid (on a percentage or dollar basis) by Citizens policyholders also would occur

in Polk County, where the representative household would pay a subsidy of over 23

percent ($988) of total premiums (homeowner’s and non-homeowner’s premiums). The

county receiving the highest subsidy by any measure (on both the percentage and dollar

basis and both Citizens and private insurers) is Monroe County. In this county, the

representative household of private insurers would receive a subsidy in excess of $650 or

over 12 percent of total premiums ($1,000 and 15 percent for Citizens).

                                                            28 For example, a homeowner paying $1,000 per year for homeowners coverage to Citizens would pay $450 for the Citizens Policyholder Surcharge and $139.27 for the Regular Assessments, or a total assessment of $589.27 for Citizens. In addition, that same homeowner would also be paying $159.36 for 11 years in FHCF assessments. The total first year assessment is $748.63.  29 For Citizens policyholders, nine counties receive a subsidy and 58 counties pay a subsidy.  

49

Table D-1A: Post-Loss Assessment Structure: Counties Receiving Subsidies

Scenario #2- Private Insurer Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Brevard $519.02 $528.02 -$9.00 -0.25% Broward $680.63 $958.71 -$278.07 -5.89% Charlotte $529.44 $545.27 -$15.83 -0.43% Collier $587.42 $710.33 -$122.91 -3.02% Dade $743.40 $1,092.14 -$348.74 -6.76%

Escambia $534.33 $587.67 -$53.34 -1.44% Franklin $545.52 $632.62 -$87.10 -2.30%

Gulf $506.08 $528.38 -$22.31 -0.64% Indian River $581.87 $784.26 -$202.39 -5.01%

Lee $541.85 $553.18 -$11.33 -0.30% Manatee $538.45 $547.46 -$9.01 -0.24% Martin $587.29 $804.28 -$216.99 -5.32% Monroe $778.32 $1,431.80 -$653.48 -12.10%

Okaloosa $542.41 $567.98 -$25.57 -0.68% Palm Beach $687.29 $1,014.03 -$326.74 -6.85% Santa Rosa $539.41 $552.41 -$13.00 -0.35% St. Lucie $574.60 $758.86 -$184.27 -4.62% Walton $503.19 $506.30 -$3.11 -0.09%

50

Table D-1B: Post-Loss Assessment Structure: Counties Paying Subsidies

Scenario #2- Private Insurer Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Alachua $397.05 $119.49 $277.56 10.07% Baker $386.31 $85.31 $300.99 11.23% Bay $518.13 $499.90 $18.23 0.51%

Bradford $368.76 $98.43 $270.33 10.56% Calhoun $400.98 $184.58 $216.40 7.78% Citrus $446.83 $258.63 $188.21 6.07% Clay $366.03 $96.85 $269.19 10.60%

Columbia $384.91 $87.92 $297.00 11.12% DeSoto $419.55 $264.06 $155.50 5.34% Dixie $419.36 $280.45 $138.92 4.77% Duval $385.35 $159.02 $226.33 8.46% Flagler $399.53 $234.93 $164.60 5.94%

Gadsden $403.97 $166.72 $237.25 8.46% Gilchrist $391.89 $116.50 $275.39 10.13% Glades $425.43 $298.03 $127.40 4.32%

Hamilton $383.80 $88.35 $295.45 11.09% Hardee $411.90 $236.01 $175.88 6.15% Hendry $430.89 $315.61 $115.28 3.86%

Hernando $636.04 $355.95 $280.10 6.35% Highlands $417.31 $244.84 $172.47 5.96%

Hillsborough $569.79 $304.67 $265.12 6.70% Holmes $403.49 $138.07 $265.42 9.48% Jackson $399.54 $187.17 $212.38 7.66%

Jefferson $403.20 $201.83 $201.37 7.20% Lafayette $394.99 $136.47 $258.52 9.43%

Lake $397.42 $124.27 $273.15 9.90% Leon $366.80 $113.10 $253.70 9.97% Levy $407.00 $244.66 $162.34 5.75%

Liberty $400.58 $169.36 $231.22 8.32% Madison $390.95 $155.68 $235.27 8.67% Marion $394.79 $118.33 $276.47 10.09% Nassau $391.39 $198.26 $193.13 7.11%

Okeechobee $423.02 $291.45 $131.57 4.48% Orange $417.58 $140.03 $277.55 9.58% Osceola $406.29 $145.78 $260.51 9.24% Pasco $661.18 $468.77 $192.41 4.19%

Pinellas $554.00 $514.94 $39.06 1.02% Polk $514.92 $203.43 $311.49 8.72%

Putnam $373.93 $108.66 $265.27 10.22%

51

Sarasota $517.65 $507.59 $10.06 0.28% Seminole $417.58 $139.78 $277.79 9.59% St. Johns $392.42 $223.92 $168.50 6.19% Sumter $399.40 $116.96 $282.45 10.19%

Suwannee $393.34 $168.05 $225.30 8.25% Taylor $406.13 $239.91 $166.22 5.90% Union $382.32 $100.40 $281.92 10.63%

Volusia $438.62 $337.80 $100.82 3.31% Wakulla $460.76 $388.11 $72.65 2.27%

Washington $409.29 $170.23 $239.07 8.42%

52

Table D-1C: Post-Loss Assessment Structure: Counties Receiving Subsidies

Scenario #2- Citizens Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Broward $2,069.02 $2,439.55 -$370.53 -7.06% Collier $1,870.38 $2,029.27 -$158.90 -3.27% Dade $2,563.31 $3,001.54 -$438.23 -7.05%

Franklin $2,197.54 $2,198.60 -$1.06 -0.02% Indian River $2,136.34 $2,498.38 -$362.04 -6.73%

Martin $2,030.26 $2,489.11 -$458.85 -8.88% Monroe $2,912.81 $3,993.44 -$1,080.63 -15.66%

Palm Beach $1,919.08 $2,383.08 -$464.00 -9.37% St. Lucie $2,107.02 $2,440.62 -$333.61 -6.27%

53

Table D-1D: Post-Loss Assessment Structure: Counties Paying Subsidies

Scenario #2- Citizens Policyholders (Hurricane Premium Relativities)

County

1st Year Assessment – Current Structure

1st Year Assessment – Based on Hurricane Premium Subsidy ($)

Subsidy (%) (% of total premiums

paid)

Alachua $1,085.74 $379.07 $706.66 21.30% Baker $1,209.67 $392.78 $816.89 22.95% Bay $1,814.02 $1,677.66 $136.36 2.87%

Bradford $1,205.59 $400.56 $805.03 22.66% Brevard $1,466.20 $1,365.75 $100.45 2.47% Calhoun $1,188.25 $438.72 $749.52 21.31% Charlotte $1,393.78 $1,338.55 $55.23 1.41%

Citrus $1,378.48 $1,017.94 $360.54 9.27% Clay $1,050.55 $352.35 $698.20 21.50%

Columbia $1,169.89 $376.47 $793.42 22.79% DeSoto $1,267.30 $865.54 $401.76 10.94% Dixie $1,286.17 $951.82 $334.35 9.01% Duval $1,032.53 $510.18 $522.35 16.26%

Escambia $1,831.87 $1,725.17 $106.70 2.23% Flagler $1,020.21 $743.38 $276.82 8.68%

Gadsden $1,036.27 $376.59 $659.68 20.49% Gilchrist $1,079.11 $385.74 $693.37 20.99% Glades $1,249.96 $1,032.64 $217.32 5.97% Gulf $1,941.78 $1,798.18 $143.59 2.87%

Hamilton $1,297.39 $425.81 $871.58 23.35% Hardee $1,269.85 $850.46 $419.39 11.40% Hendry $1,259.14 $1,029.81 $229.33 6.27%

Hernando $1,380.01 $1,124.43 $255.58 6.56% Highlands $1,152.04 $749.79 $402.25 11.67%

Hillsborough $1,497.31 $858.39 $638.92 15.49% Holmes $1,051.57 $387.41 $664.16 20.44% Jackson $1,034.74 $386.00 $648.74 20.17%

Jefferson $1,280.31 $727.41 $552.90 14.95% Lafayette $1,210.69 $410.09 $800.60 22.48%

Lake $1,167.85 $418.20 $749.65 21.55% Lee $1,413.16 $1,337.13 $76.03 1.92%

Leon $1,001.08 $338.76 $662.32 21.02% Levy $1,165.30 $879.47 $285.83 8.23%

Liberty $1,304.53 $489.24 $815.29 21.76% Madison $1,165.81 $407.04 $758.77 21.84% Manatee $1,464.93 $1,396.37 $68.56 1.69% Marion $1,090.33 $384.65 $705.68 21.22% Nassau $1,188.76 $825.87 $362.89 10.31%

Okaloosa $1,817.34 $1,706.18 $111.16 2.34%

54

Okeechobee $1,282.09 $1,002.98 $279.11 7.54% Orange $1,182.39 $409.81 $772.57 22.03% Osceola $1,080.64 $355.47 $725.17 21.93% Pasco $1,887.97 $1,663.26 $224.71 4.60%

Pinellas $1,515.67 $1,261.46 $254.21 6.11% Polk $1,536.58 $548.24 $988.34 23.53%

Putnam $1,028.11 $353.17 $674.94 21.07% Santa Rosa $1,879.56 $1,760.83 $118.73 2.44%

Sarasota $1,364.71 $1,293.32 $71.39 1.85% Seminole $1,166.32 $372.34 $793.98 22.85% St. Johns $1,034.23 $743.08 $291.15 9.05% Sumter $1,079.62 $381.28 $698.34 21.13%

Suwannee $1,401.43 $500.66 $900.77 22.89% Taylor $1,372.62 $976.57 $396.04 10.21% Union $1,215.28 $390.24 $825.04 23.10%

Volusia $1,164.28 $927.73 $236.55 6.82% Wakulla $1,449.37 $1,184.01 $265.36 6.58% Walton $1,896.13 $1,773.82 $122.31 2.49%

Washington $1,299.43 $495.43 $804.00 21.52%