State Farm to stop insuring Florida
State Farm Florida says it will no longer renew policies for 1.2 million customers after regulators denied requests for a 47% rate hike in the hurricane-prone state.
MIAMI, Florida (CNN) -- Florida's largest private insurer is pulling the plug on homeowners' policies in the state, citing the losses suffered since the brutal 2004 hurricane season.
The decision by State Farm Florida comes two weeks after state insurance regulators rejected the company's request to raise rates by more than 47%. The decision means State Farm Florida - a subsidiary of national insurance giant State Farm Mutual - will no longer renew policies for its roughly 1.2 million customers in the Sunshine State.
"This is not an action we wanted to take, but one we must take given the realities of the Florida property insurance market," company President Jim Thompson said in a statement announcing the decision.
The company said it has paid out $1.21 in claims for every dollar of premiums it has collected since 2000 and suffered billions in losses after the 2004 hurricane season, when four major storms hit the state. And it said its net worth had dropped by nearly 25% since 2006 even with no major disasters.
"This is not something any business can afford to do," Thompson said.
Company spokeswoman Michal Connolly said the announcement is the first step in a two-year process that will require the approval of state regulators.
In a statement issued after the decision, Florida Insurance Commissioner Kevin McCarty said the company had warned that a withdrawal from the homeowners' market was possible when it was seeking a rate increase. He said his office had 90 days to approve the company's plans.
"I will do everything within my power to protect Florida consumers from unnecessary destabilization of the insurance market that this might cause and to ensure that Florida consumers are protected and have access to insurance at rates that are not excessive or unfairly discriminatory," McCarty said.
State Farm Florida was set up as a separate entity in 1998 to address what the company called the "unique risks" of doing business in Florida. It said it had to borrow $750 million from its parent company after 2004, and has been unable to pay that money back.