State Farm Florida Insurance Co., Florida’s largest private property insurer, announced plans Tuesday to stop writing homeowners insurance in the state, forcing 1.2 million policyholders to find new coverage.

The announcement comes after the State Insurance Commission turned down the company’s request for a 47.1 percent rate hike.

If the company continues to write insurance in Florida without a rate increase, it won’t be able to afford to pay claims by 2011, asserted Jim Thompson, president of State Farm “If we had not taken these steps, it would have resulted in an insolvency,” Thompson said.

The action could send home owners to the state-run Citizens Property Insurance Corp., which is underwritten by the Florida Hurricane Catastrophe Fund. Critics say that fund doesn’t have nearly enough money to pay claims if there is a big hurricane.

Florida Gov. Charlie Crist dismissed concerns: “[State Farm] probably charges about the highest rates in the state, anyway. I think that Floridians will be much better off without them,” the governor said.

Source: A.M. Best (01/27/2009) and South Florida Sun Sentinel, Anika Myers Palm (01/28/2009)