The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Appropriations
BILL: CS/CS/SB 1574
INTRODUCER: Appropriations Committee (Recommended by Appropriations Subcommittee on
Agriculture, Environment, and General Government); Banking and Insurance
Committee; and Senator Brandes
SUBJECT: Citizens Property Insurance Corporation
DATE: April 20, 2021 REVISED:
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Schrader Knudson BI Fav/CS
2. Sanders Betta AEG Recommend: Fav/CS
3. Sanders Sadberry AP Fav/CS
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/CS/SB 1574 revises Citizens Property Insurance Corporation (Citizens or corporation)
eligibility criteria, rates, assessment surcharges on Citizens’ policyholders, depopulation
programs, producing agent commissions, and confidentiality exceptions for underwriting and
claim files.
The bill defines “primary residence” to mean the dwelling that the insured represented as their
permanent home on the insurance application or otherwise to the corporation.
The bill limits application of the Citizens “glide path,” which prevents rate increases of greater
than 10 percent, by applying the glide path to only Citizens personal lines residential policies
issued on or before January 1, 2022, on residential properties used as the primary residence with
a dwelling replacement cost of less than $700,000 or single-unit condominiums with a dwelling
and contents replacement cost of less than $700,000.
The bill provides that Citizens policyholders become ineligible for Citizens personal lines
residential coverage upon receiving an offer from an authorized insurer for comparable coverage
that is not 15 percent greater than the actuarially sound Citizens premium would be on the
property. Under current law, Citizens policyholders remain eligible unless they receive an offer
BILL: CS/CS/SB 1574 Page 2
of comparable coverage less than the current Citizens premium, which for many policyholders is
subject to the glide path’s 10 percent limit on annual rate increases.
The bill increases the maximum surcharge that may be levied on Citizens’ policyholders if
Citizens projects a deficit in one of its accounts to: 20 percent of premium if Citizens has
one million policyholders but less than 1.5 million policyholders; and 25 percent of premium if
Citizens has 1.5 million policyholders or more. The surcharge may be levied for each of
Citizens’ three accounts.
The bill authorizes surplus lines insurers to participate in Citizens’ depopulation, take-out, and
keep-out plans. The surplus lines insurer must: meet financial requirements; provide notice to the
policyholder which outlines any coverage differences and explains surplus lines policies are not
covered by the Florida Insurance Guaranty Association; and provide coverage similar to that
provided by Citizens. A risk with a personal residential dwelling replacement cost or a single
condominium unit with a combined dwelling and contents replacement cost that is less than
$700,000, remains eligible for Citizens regardless of receipt of an offer of comparable coverage
from a surplus lines insurer. If such risk has a replacement cost of $700,000 or more, however,
the risk is ineligible for Citizens coverage upon receiving an offer of comparable coverage from
a surplus lines insurer that is not greater than 15 percent more than the premium for Citizens
coverage.
The bill also:
 Revises confidentiality exceptions for Citizens’ underwriting and confidential claim files;
 Limits the commissions Citizens may pay to producing agents; and
 Makes technical changes to s. 627.3517, F.S., and reenacts and makes conforming changes to
s. 627.3518, F.S.
The bill does not impact state revenue or expenditures.
The bill takes effect January 1, 2022.
II. Present Situation:
Citizens Property Insurance Corporation—Overview
Citizens Property Insurance Corporation (Citizens or corporation) is a state-created, not-for-
profit, tax-exempt governmental entity whose public purpose is to provide property insurance
coverage to those unable to find affordable coverage in the voluntary admitted market. 1 Citizens
is not a private insurance company.2 Citizens was statutorily created in 2002 when the Florida
Legislature combined the state’s two insurers of last resort, the Florida Residential Property and
Casualty Joint Underwriting Association (RPCJUA) and the Florida Windstorm Underwriting
Association (FWUA). Citizens operates in accordance with the provisions in s. 627.351(6), F.S.,
and is governed by an eight member Board of Governors that administers its Plan of Operations.
The Plan of Operations is reviewed and approved by the Financial Services Commission.3 The
1
Admitted market means insurance companies licensed to transact insurance in Florida.
2
Section 627.351(6)(a)1., F.S.
3
Section 627.351(6)(a)2., F.S.
BILL: CS/CS/SB 1574 Page 3
Governor, President of the Senate, Speaker of the House of Representatives, and Chief Financial
Officer each appoints two members to the board.4 Citizens is subject to regulation by the Florida
Office of Insurance Regulation (OIR).
Citizens currently offers three policy types: Personal Lines Accounts, Commercial Lines
Accounts and Coastal.
Citizens’ Accounts
The Personal Lines Account (PLA) offers personal lines residential policies that provide
comprehensive, multi-peril coverage statewide, except for those areas contained in the Coastal
Account. The PLA also writes policies that exclude coverage for wind in areas contained within
the Coastal Account. Personal lines residential coverage consists of the types of coverage
provided to homeowners, mobile homeowners, dwellings, tenants, and condominium unit
owner’s policies.5
The Commercial Lines Account (CLA) offers commercial lines residential and non-residential
policies that provide basic perils coverage statewide, except for those areas contained in the
Coastal Account. The CLA also writes policies that exclude coverage for wind in areas contained
within the Coastal Account. Commercial lines coverage includes commercial residential policies
covering condominium associations, homeowners’ associations, and apartment buildings. The
coverage also includes commercial non-residential policies covering business properties.6
The Coastal Account offers personal residential, commercial residential, and commercial non-
residential policies in coastal areas of the state. Citizens must offer policies that solely cover the
peril of wind (wind only policies) and may offer multi-peril policies.7
The Citizens policyholder eligibility clearinghouse program was established by the Legislature in
2013.8 Under the program, new and renewal policies for Citizens are placed into the
clearinghouse where participating private insurers can review and decide to make offers of
coverage before policies are placed or renewed with Citizens.9
Current Policies
As of February 28, 2021, Citizens reports 552,340 policies in-force with a total exposure of
$150,498,489,611.10 The below chart outlines Citizens account and product type, number of
policies in-force, total exposure and premium with surcharges.
4
Section 627.351(6)(c)4.a., F.S.
5
See s. 627.351(6)(b)2.a., F.S. and Account History and Characteristics, Citizens Property Insurance Corporation,
https://www.citizensfla.com/documents/20702/1183352/20160315+05A+Citizens+Account+History.pdf/31f51358-7105-
40e9-aa75-597f51a99563 (March 2016) (last visited Mar. 24, 2021).
6
Id.
7
Id.
8
Section 10, ch. 2013-60, L.O.F.
9
Section 627.3518(2)-(3), F.S.
10
Citizens Property Insurance, About Us, Snapshot, February 28, 2021, https://www.citizensfla.com/-/20210228-policies-in-
force (last visited Mar. 28, 2021).
BILL: CS/CS/SB 1574 Page 4
Policies In- Premium with
Account Product Line Total Exposure
Force Surcharges
PLA Personal Residential Multi-peril (PR-M) 417,152 101,117,610,386 830,762,252
Coastal Personal Residential Multi-peril (PR-M) 71,958 15,117,007,309 185,808,533
Coastal Personal Residential Wind-Only (PR-W) 58,163 23,726,750,884 145,934,626
Coastal Commercial Residential Multi-peril (CR-M) 125 631,877,883 2,910,767
Coastal Commercial Residential Wind-Only (CR-W) 1,805 4,590,853,279 25,745,969
Coastal Commercial Non-Residential Multi-peril 25 20,269,100 181,093
(CNR-M)
Coastal Commercial Non-Residential Wind-Only 2,407 1,945,320,260 23,429,973
(CNR-W)
CLA Commercial Residential Multi-peril (CR-M) 566 3,208,005,710 12,309,859
CLA Commercial Non-Residential Multi-peril 139 140,794,800 880,037
(CNR-M)
Total 552,340 150,498,489,611 1,227,963,109
Source: Citizens Property Insurance11
These numbers do not reflect policies tagged for takeout via Citizens’ Depopulation Program but
still serviced by Citizens.12 Citizens’ policy count grew by more than 100,000 in 2020 with
2,000-3,000 new policies written each week. At this rate, Citizens estimates an additional
100,000 policies by year end 2021.13
Citizens Glide Path Rates
From 2007 until 2010, Citizens rates were frozen by statute at the level that had been established
in 2006. In 2010, the Legislature established a “glide path” to impose annual rate increases up to
a level that is actuarially sound. Citizens must implement an annual rate increase which, except
for sinkhole coverage, does not exceed 10 percent above the previous year for any individual
policyholder, adjusted for coverage changes and surcharges.14 The implementation of this
increase ceases when Citizens has achieved actuarially sound rates. In addition to the overall
glide path rate increase, Citizens can increase its rates to recover the additional reimbursement
premium that it incurs as a result of the annual cash build-up factor added to the price of the
mandatory layer of the Florida Hurricane Catastrophe Fund coverage, pursuant to
s. 215.555(5)(b), F.S.
Citizens Financial Resources
Citizens’ financial resources include insurance premiums, investment income, and operating
surplus from prior years, Florida Hurricane Catastrophe Fund (FHCF) reimbursements, private
11
Id.
12
Id.
13
Citizens Property Insurance Corporation, 2021 Rate Kit, Executive Summary, Rate Structure Discussion,
https://www.citizensfla.com/documents/20702/15266147/2021+Rate+Kit_final.pdf/d9da9ea7-73da-a958-6477-
263da4e49e41?t=1607993377967 (last visited Mar. 26, 2021).
14 Section 627.351(6)(n)6., F.S.
BILL: CS/CS/SB 1574 Page 5
reinsurance, policyholder surcharges, and regular and emergency assessments. Non-weather
water losses, reinsurance costs and litigation are the major determinants of insurance rates.15 In
the event of a catastrophic storm or series of smaller storms, reserves could be exhausted, leaving
Citizens unable to pay all claims.16 Under Florida law, if the Citizens’ Board of Directors
determines that a Citizens’ account has a projected deficit, Citizens is authorized to levy
assessments17 on its policyholders and on each line of property and casualty line of business
other than workers’ compensation insurance and medical malpractice insurance.18 Citizens may
impose three assessment tiers and their sequence is as follows:19
Citizens Policyholder Surcharge:
Requires up to 15 percent of premium surcharge for 12 months on all Citizens' policies, collected
upon issuance or renewal. This 15 percent assessment can be levied for each of the three
Citizens’ accounts—the CLA, the PLA, and the Coastal Account— that project a deficit. Thus,
the total maximum premium surcharge a policyholder could be assessed is 45 percent.20
Regular Assessment:
If the Citizens’ surcharge is insufficient to cure the deficit for the coastal account, Citizens can
require an assessment against all other insurers except medical malpractice and workers’
compensation. The assessment may be recouped from policyholders through a rate filing process
of up to two percent of premium or two percent of the deficit, whichever is greater.21 This
assessment is not levied against Citizens’ policyholders.
Emergency Assessment:
Requires any remaining deficit for Citizens’ three accounts be funded by multi-year emergency
assessments on all insurance policyholders (except medical malpractice and workers’
compensation), including Citizens’ policyholders. This assessment may not exceed the greater of
10 percent of the amount needed to cover the deficit, plus interest, fees, commissions, required
reserves, and other costs associated with financing the original deficit, or 10 percent of the
aggregate statewide direct written premium for subject lines of business and all accounts of the
15
Citizens Property Insurance Corporation, 2021 Rate Kit, Citizens 2021 Rates, Frequently Asked Questions,
https://www.citizensfla.com/documents/20702/15266147/2021+Rate+Kit_final.pdf/d9da9ea7-73da-a958-6477-
263da4e49e41?t=1607993377967 (last visited Mar. 26, 2021).
16
Citizens Property Insurance Corporation, Insurance/Insurance 101/Assessments, https://www.citizensfla.com/assessments
(last visited Mar. 26, 2021).
17
Assessments are charges that Citizens and non-Citizens policyholders can be required to pay, in addition to their regular
policy premiums. Citizens Property Insurance Corporation, Insurance/Insurance 101/Assessments,
https://www.citizensfla.com/assessments (last visited Mar. 26, 2021).
18
Accident and health insurance and policies written under the National Flood Insurance Program or the Federal Crop
Insurance Program are not assessable types of property and casualty insurance. Surplus lines insurers are not assessable, but
their policyholders are. Section 627.351.(6)(b)3.f.-h., F.S.
19
Citizens Property Insurance Corporation, Insurance/Insurance 101/Assessments, Assessment Tiers,
https://www.citizensfla.com/assessments (last visited Mar. 26, 2021).
20
Sections 627.351.(6)(b)3.(i)(I) and 627.351.(6)(c)21., F.S. See also, https://www.citizensfla.com/assessments (last visited
Mar. 26, 2021).
21
Section 627.351.(6)(b)3.a., F.S.
BILL: CS/CS/SB 1574 Page 6
corporation for the prior year, plus interest, fees, commissions, required reserves, and other costs
associated with financing the deficit.22
Eligibility for Insurance in Citizens
Current law requires Citizens to provide a procedure for determining the eligibility of a potential
risk for insurance in Citizens and provides specific eligibility requirements based on premium
amounts, value of the property insured, and the location of the property. Risks not meeting the
statutory eligibility requirements cannot be insured by Citizens. Citizens has additional eligibility
requirements set out in their underwriting rules. These rules are approved by the Office of
Insurance Regulation (OIR) and are set out in Citizens’ underwriting manuals.23
Eligibility Based on Premium Amount
An applicant for residential insurance cannot buy insurance in Citizens if an authorized insurer in
the private market offers the applicant insurance for a premium that does not exceed the Citizens
premium by 15 percent or more. 24 In addition, the coverage offered by the private insurer must
be comparable to Citizens’ coverage.
A residential policyholder cannot renew insurance in Citizens if an a