A two-judge panel has rejected a petition by Texas's Office ofPublic Insurance Council to roll back a State Farm Lloyds ratehike.

The insurer raised rates by 20 percent for new policies andrenewals in late 2012, which would collect an additional $317million in annual premiums from 1.2 million homeowners'policyholders in Texas, a file-and-use state. State Farm, thelargest property insurer in Texas, maintains that the rate hikeswere needed to cover recent weather-related losses.

Public Insurance Counsel Deeia Beck scrutinized the increase,calling it “excessive” and actuarially unsound.

“State Farm Lloyds proposed rate changes across policyholdersare unfairly discriminatory because they do not bear a reasonablerelationship to the expected loss and expense experience among therisks and are not adequately supported,” she stated in a petitionfrom the Office of the Public Insurance Counsel.

The judges reviewing the case, Hunter Burkhalter and Henry Card,rejected the challenge in a written ruling, saying that “State FarmLloyd's rates are not excessive, unreasonable or unfairlydiscriminatory within the meaning of the Texas insurance Code.”

The judges are forwarding their recommendations to TexasInsurance Commissioner Julia Rathgeber, who will review thefindings before deciding whether to permit the insurer to continuecharging its current premiums.

“Setting adequate rates in Texas enables us to keep our promisesto our customers when they need us the most,” says State Farmspokeswoman Patti Kelley. “The state's insurance regulatorrightfully let our rates go into effect, and now theadministrative law judges agree our rates werejustified.”

According to the Texas Department of Insurance (TDI), State Farmposted a 47.5 percent loss ratio in 2012, compared to the statewideaverage of 54.4 percent. In 2012, the earned written premium forState Farm's homeowner insurance companies, including State FarmLloyds, increased by 1.5 percent to $18.3 billion. Underwritingloss was $0.3 billion.

In the past, TDI alleged that State Farm Lloyds overchargedcustomers for homeowners' policies purchased between 2003 and2008.