State Farm says that it is pulling out of the Florida individual property insurance market. It says it doesn't want to insure homes in Florida anymore because the state won't allow the company to charge high enough premiums. About one million homeowners will lose their policies if State Farm pulls out of the state.
The insurer cited risks from hurricanes and the rising cost of everyday claims submitted by the state’s homeowners in an e- mailed statement today. Surplus funds held by State Farm’s Florida unit fell by $201 million, or 24 percent, in the first three quarters of 2008, a period when no hurricanes hit the state, said Jeff McCollum, a spokesman for the Bloomington, Illinois-based insurer.
An increasing number of Florida homeowners are relying on insurers with lower claims-paying reserves. The two largest U.S. residential insurers, State Farm and Allstate Corp., scaled back following record storm seasons in 2004 and 2005. Florida's largest insurer is now a state-run company that would have to borrow money to meet obligations if a major hurricane were to hit, Fitch Ratings said in a report last year.
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The insurer filed a plan with regulators to drop home customers over a two-year span after the surplus at its Florida unit dropped in the nine months ending Sept. 30. The insurer lent $750 million to its Florida subsidiary after a series of storms in 2004 that the subsidiary was never able to repay, the company said today. Under the plan filed today, the insurer proposes continuing to offer car, health and life insurance.
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State Farm's move follows a ruling by an administrative law judge this month that denied the insurer a 47 percent rate increase on home policies.
Twenty-five percent of the coastal property in U.S. hurricane zones in located in Florida. A major hurricane may cause more than $100 billion in insured damage if it hits Miami directly, according to models by Boston-based AIR Worldwide Corp
The hurricanes have left many homeowners in Florida scrambling for coverage from a decreasing number of insurance providers. State Farm must get approval from the state's insurance regulators to drop the existing policies and the review process is just starting.
State Farm 
