State Farm Florida dropped its plan to withdraw from the property insurance market in hurricane-prone Florida on Wednesday as part of a settlement with state regulators that includes an average 14.8 percent rate increase for homeowners and condominium owners.
The agreement also lets the insurer, which wants to reduce exposure to the greatest storm risks, not renew about 15 percent of its policies.
The deal resolves a dispute pending before an administrative law judge over conditions Insurance Commissioner Kevin McCarty had placed on the company's previously announced withdrawal plan.
As Florida's largest private property insurer with about 810,000 policies, the company had originally said in January it would withdraw after McCarty rejected a 47.1 percent rate increase. Company officials had said they needed such a large increase to remain financially viable due to Florida's hurricane risk.
McCarty said the company, a subsidiary of Bloomington, Ill.-based State Farm Insurance, has since submitted new information to justify the smaller increase.
"In no way are we giving them 15 percent as a compromise," McCarty said at a news conference. "I can say absolutely, categorically and without hesitation it has not been a policy change."
McCarty said the rate increase is part of a national trend, particularly in coastal states including North Carolina, Mississippi, Louisiana and Texas where the hurricane threat is greatest.
Florida, though, is at greater risk than any other state with 2,276 miles of tidal coastlines including bays, inlets and 1,197 miles of beaches on the Atlantic Ocean and Gulf of Mexico.
"What's going on in Florida is a microcosm of what's going on in the rest of the United States," McCarty said.
Gov. Charlie Crist, who famously said "good riddance" to State Farm 10 months ago, praised McCarty for "great work" following the announcement.
Many politicians from vulnerable states have been pushing for a national version of Florida's Hurricane Catastrophe Fund. It offers backup coverage for insurers that otherwise may get it only at higher cost from entities based outside the United States.
State Farm Florida President Jim Thompson said the agreement will help the company stabilize its financial condition.
He added those with property policies that won't be renewed will receive at least six months of advance notice, adding "new rates will go into effect as policies are renewed."
The company will be allowed to drop about 125,000 policies. The agreement also requires State Farm agents to sell policies with other companies to customers it sheds.
They also can seek new coverage on their own or sign up with state-backed Citizens Property Insurance Corp., Florida's largest property insurer with about 1 million customers. Officials seeking to reduce the state's exposure, though, have been trying to downsize Citizens, originally intended as an insurer of last resort.