TALLAHASSEE, Fla. — Rebuffed by regulators in its efforts to raise homeowner rates by nearly 50 percent, Florida’s largest private insurer of property announced Tuesday that it would shutter all its property insurance business in the state.
The decision, by State Farm Florida, a subsidiary of the giant insurer State Farm Mutual, affects more than a million policyholders and is another financial setback to a state with one of the nation’s highest foreclosure rates and rising unemployment. It could also increase the burden on a state-created insurance company, which must accept customers if they have nowhere else to go.
The announcement followed by two weeks a decision of the Florida insurance commissioner, Kevin McCarty, to reject the company’s request for a statewide homeowner rate increase of 47.1 percent.
State Farm Florida, badly hurt like other insurers by a record eight hurricanes in 2004-5, says that it has been unable to repay loans that those storms forced it to acquire from its parent company, and that it continues losing money on its Florida property business. The denial of the rate increase, those officials say, has made it impossible to continue in that business.
“This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market,” Jim Thompson, president of State Farm Florida, said in a statement.
Gov. Charlie Crist, a Republican who has consistently criticized insurance rates as too high, sounded defiant Tuesday when asked about State Farm’s decision.
“I think Floridians will be much better without them,” Mr. Crist told reporters.
Asked if he thought the company was bluffing in an effort to win a rate increase, he replied, “I don’t really know, and I don’t really care.”
But State Senator Mike Fasano, a Republican from New Port Richey, said he would file legislation that would cap the number of policies a company could drop in any given year. The measure would apply retroactively.
“We can’t allow State Farm to further an economic crisis by unloading one million policies,” Mr. Fasano said.
State Farm Florida said its plan, presented to regulators on Tuesday, called for a shutdown of its property insurance business over the course of two years. The company has 1.2 million property insurance policyholders. Most are homeowners, although there are also renters, boat owners and business owners.
Regulators have 90 days to review the plan, though they have little power to stop it. Once it is approved, the company must wait six months before it can begin dropping policyholders.
The company said it had no plans to abandon its business in auto, health and life insurance.
State Farm employs nearly 5,000 people across the state, in addition to 5,300 contractors who sell State Farm insurance exclusively. Chris Neal, a spokesman for State Farm Florida, could not say how many jobs might be lost as a result of its move.
