State Farm has the green light to pull out of Florida's property insurance market — as long as it meets a laundry list of demands from regulators.
Florida Insurance Commissioner Kevin McCarty said the "conditional'' approval granted Friday is meant to ensure that the exodus of the state's biggest property insurer isn't "hazardous'' to its policyholders and the public at large.
Among the biggest conditions, State Farm has to free up its agents to steer discarded policyholders to other private insurers so the state-run Citizens Property Insurance doesn't become a dumping ground. As "captive'' agents, State Farm's network of 800 agents statewide are compelled to write policies for State Farm first and, if they cannot place someone, turn to Citizens Property Insurance, the state-run insurer of last resort.
All told, State Farm is dropping about 1.2 million policies, 700,000 of them covering homeowners.
Citizens, which has about 1 million policies now, would be at greater risk of being unable to pay claims from a major hurricane if it continues to swell by hundreds of thousands of policies. Under state law, everyone who pays insurance premiums in Florida could be assessed to help Citizens pay claims beyond its reserves.
McCarty blasted State Farm for trying to "warehouse'' its unwanted policies in Citizens, saying it has already steered 143,000 policies in that direction.
"State Farm is trying to hold the people of Florida and their policyholders hostage, and we're not willing to do that,'' McCarty said in a conference call with reporters. "Citizens is already overtaxed with the policies they have.''
Among other conditions of the withdrawal:
• State Farm Florida must surrender its certificate of authority within 30 days, which effectively bans the company from writing new homeowners policies but not servicing existing policies.
• State Farm has to issue pro-rata refunds of premiums to any policyholder who voluntarily cancels or does not renew a policy.
State Farm spokesman Chris Neal said in a statement that the agency welcomes discussions with the state Office of Insurance Regulation "to create an orderly process that is best for our customers, our agents and the marketplace.'' He also indicated a "sincere hope'' to find a way for State Farm agents to service policies directly to insurers approved by the state.
State Farm has 21 days to decide whether to abide by McCarty's order or request an administrative hearing.
In its plan submitted to the state, State Farm said it wanted within two years to shed its policies affecting house and condo owners, renters and customers with coverage for personal liability, boats, personal articles and business property and liability. The Illinois-based insurance giant wants to hold on to its more lucrative lines in Florida, including its market-leading auto insurance and life insurance.