TALLAHASSEE - State Farm Florida dropped its plan to withdraw from the property insurance market in hurricane-prone Florida today as part of a settlement with state regulators that includes an average 14.8 percent rate increase for homeowners and condominium owners.

The agreement also lets the company, which wants to reduce exposure to the greatest storm risks, not renew about 15 percent of its policies.

The deal resolves a dispute pending before an administrative law judge over conditions Insurance Commissioner Kevin McCarty had placed on the company's previously announced withdrawal plan.

As Florida's largest private property insurer with about 810,000 policies, the company had said in January it would withdraw after McCarty rejected a 47.1 percent rate increase. Company officials had said they needed such a large increase to remain financially viable due to Florida's hurricane risk.

McCarty said the company, a subsidiary of Bloomington, Ill.-based State Farm Insurance, has since submitted new information to justify the smaller increase.

"In no way are we giving them 15 percent as a compromise," McCarty said at a news conference. "I can say absolutely, categorically and without hesitation it has not been a policy change."

McCarty said the rate increase is part of a national trend, particularly in coastal states including North Carolina, Mississippi, Louisiana and Texas where the hurricane threat is greatest.

Florida, though, is at greater risk than any other state with 2,276 miles of tidal coastlines including bays, inlets and 1,197 miles of beaches on the Atlantic Ocean and Gulf of Mexico.

"What's going on in Florida is a microcosm of what's going on in the rest of the United States," McCarty said. "It's a national problem that's going to require a national solution."

Gov. Charlie Crist, who famously said "good riddance" to State Farm 10 months ago, praised McCarty for "great work" after a bill-signing ceremony in Tampa.

Many politicians from vulnerable states have been pushing for a national version of Florida's Hurricane Catastrophe Fund. It offers backup coverage for insurers that otherwise may get it only at higher cost from entities based outside the United States.

State Farm Florida President Jim Thompson said the agreement will help the company stabilize its financial condition.

"Property policies designated for non-renewal will receive at least six months advance notice," Thompson said in a statement. "New rates will go into effect as policies are renewed."

The company will be allowed to drop 125,000 policies. The agreement also requires State Farm agents to sell policies with other companies to customers let go by State Farm.

They also can seek new coverage on their own or sign up with state-backed Citizens Property Insurance Corp., Florida's largest property insurer with about 1 million customers. Officials seeking to reduce the state's exposure, though, have been trying to downsize Citizens, originally intended as an insurer of last resort.

McCarty said it's unlikely Citizens will get all the customers State Farm is letting go but likely will get some who don't go with another private company.

The deal may be good for State Farm, but state Rep. Bill Proctor, R-St. Augustine, said "We still have a real property insurance problem. It's not going to go away.''

At the Tim Holladay State Farm office in New Port Richey, employees are elated by the news from the state capital.

"Actually, we're very excited. It allows us to continue to a relationship with all of our customers, so it's great we can stay in business here in the state of Florida" said agent Tiffany Drewes.

She said concerned customers began calling soon after State Farm's announcement in January.

While there were smiles at the State Farm office, State Sen. Mike Fasano, R-New Port Richey, is skeptical. He said State Farm was bluffing when it threatened to move out of the state.

"From Day 1 many of us believed that State Farm would never leave the state,'' Fasano said. "By leaving the state they gave up a lot of customers, a lot of premium payers."

Fasano said the company only wants to sell lucrative policies like auto insurance. Still, he looks at the deal as a positive.

"At least people, most people will be able to keep State Farm, but the threats that State Farm made to the state, to its customers, shame on them."

At the urging of small insurers, Crist in June vetoed a bill supported by State Farm that would have deregulated rates for some policies offered by big insurers. The "Consumer Choice" bill would have given customers willing to pay higher rates a chance to get coverage from well-capitalized companies that otherwise might not insure them.

Proctor, the sponsor, said the bill has been reintroduced with changes designed to prevent harm to smaller companies.