Before there was an FWCJUA, the Florida Workers Compensation Insurance Plan (FWCIP) was the market of last resort. The FWCIP was not a self-funding plan, but rather was funded by insurance carriers licensed to write workers compensation insurance in Florida. In the mid-1980's, premiums became insufficient to cover losses in the FWCIP and carrier assessments were levied. Because carriers funded the FWCIP on the basis of their voluntary market share, the impact of the sizable FWCIP operating losses was voluntary market shrinkage. By the early 1990's, 12.7% of Florida's workers compensation market was in the FWCIP generating in excess of $200 million in underwriting losses.

The domestic insurance industry, foreign carriers, employers, and the Department of Insurance were all very concerned with the plight of Florida's workers compensation marketplace and co-participated in the creation of the FWCJUA enabling legislation. Their objectives were to remove the residual market burden and encourage carriers to return to Florida's voluntary market; address the needs of "small good risks;" depopulate the residual market; and provide a solvent self-funding organization.

Thus, created in 1993 as part of the workers compensation reform, the FWCJUA was designed as a self-funding plan to provide workers compensation and employers liability insurance to employers who are required by law to maintain such insurance and who are in good faith entitled to, but who are unable to purchase insurance through the voluntary market. As a result, employers insured within the FWCJUA pay premiums in excess of those paid in the voluntary market. From inception in 1994 through July 2003, there were three rating plans established for various classifications of risks and all employers were assigned to one of these three rating subplans either "A", "B", or "C" with Subplan "C" insureds receiving an assessable policy. During this period, the FWCJUA was required to maintain actuarially sound rates.

In 2003, the Legislature established Subplan "D" to provide coverage for generally small employers (15 or fewer employees) and charitable organizations. Subplan "D" rates were capped as a percentage over voluntary market rates. On July 26, 2003, the FWCJUA was required to begin writing policies under the new Subplan "D" at voluntary market rate with a surcharge not to exceed 25%, however those organizations exempt from federal income tax under 501(c)(3) the surcharge was not to exceed 10%. Those capped rates generated a substantial deficit with the only means of elimination being to levy an assessment on those policyholders. In 2004, the Legislature addressed the problem by creating a three tier rating plan that based the insured's premium on their experience and while capping the rates, the surcharges over manual rates were increased and provisions were made to ensure actuarially sound rates by January 2007.

The Subplan "D" deficit is being funded through a Workers Compensation Trust Fund contingency reserve.  Further, the FWCJUA has the statutory authority to assess its policyholders in Tier 3 and increase rates in all three rating tiers if it is unable to pay its obligations.  For Tier 1 and Tier 2, the FWCJUA could request OIR to levy a "below the line" assessment against premiums charged to insureds for workers compensation insurance.  Currently, the FWCJUA has sufficient cash resources available to meet its balance sheet liabilities as they become due. 

The FWCJUA was designed to depopulate the Florida workers compensation residual market and invigorate the competitive or voluntary market. Accordingly, it is appropriate to compare the FWCJUA's results to that of its predecessor, the Florida Workers' Compensation Insurance Plan (FWCIP).

Further, the Florida Office of Insurance Regulation concluded in its 2011 Workers’ Compensation Annual Report that of the six most populous states, Florida is the largest market dominated by private market insurers, rather than a state-sponsored residual market.  This degree of private  activity indicates that coverage should be generally available in the voluntary market.  The report also noted that the residual market is small, suggesting that the voluntary market is absorbing the vast majority of demand.  This is a considerable improvement from 1993.

A contributing factor to the availability of affordable, competitive voluntary market workers’ compensation insurance coverage in Florida has been the existence of a viable residual market mechanism.

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