State Farm will not renew coverage for about 2,600policyholders, mainly in Alabama's beach resort areas, the companysaid.

Karen Cutter, State Farm's Alabama vice president for agencies,said the 2004-2005 catastrophes have shown that “we must continueto manager our property-loss exposure along the coast for the sakeof all of our policyholders.”

“This has been a difficult decision; one that was made withcareful review and great consideration,” she said.

The Bloomington, Ill.-based insurer, which announced thenonrenewal action Friday, has the biggest market share on theAlabama coast and is the state's largest home insurer. Most ofthose affected by the nonrenewal notice own beach condominiums,state regulators said.

Ragan Ingram, assistant commissioner with the Alabama InsuranceDepartment, said he met last week with company officials askingthem to reconsider the decision.

“Understandably, we are extremely disappointed in State Farm'sdecision to nonrenew policies in the coastal areas of Alabama,” hetold the NU Online News Service.

The announcement came after State Farm agreed to pay about $80million to more than 600 Mississippi policyholders who sued overKatrina damage and proposed a class action settlement to pay atleast $50 million more to resolve thousands of other potentialKatrina claims in three coastal counties.

Separately, a jury awarded a Biloxi, Miss., couple whose homewas destroyed by Katrina $2.5 million in punitive damages againstState Farm–an amount reduced to $1 million by a federal judge.

State Farm's cutbacks in Alabama affect properties within about1,000 feet of the shoreline of the Gulf of Mexico, Mobile Bay andits connected bays, said Mr. Ingram.

The policies not being renewed represent less than 1 percent ofthe company's policies statewide, said State Farm spokesman DavidMajors.