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When State Farm announced in January that it would leave the Florida property insurance market, Gov. Charlie Crist’s response amounted to “good riddance.”

“Floridians will be much better off without them,” he sniffed.

It turns out State Farm and Florida need each other more than they initially acknowledged.

The state’s Office of Insurance Regulation (OIR) recently approved a nearly 15 percent rate increase for State Farm property policies. That’s far less than the 47 percent the insurer had sought — and regulators had denied — a year ago, but enough to persuade the company to stay put.

If State Farm could live with 15 percent, why was it seeking three times that amount — and threatening to leave if it didn’t get it? And if Florida believed it didn’t need the major insurer, why did it bother trying to appease it?

Clearly, both sides were posturing. Nevertheless, it’s a positive development for the Florida insurance market, which remains in a precarious position despite the fact the state has not been hit with a hurricane in four years.

When State Farm announced its plans to withdraw from homeowners coverage, state officials confidently noted that 30 to 40 other insurance companies had been approved for insuring property that could take over State Farm’s policies. But that proved to be a gross mischaracterization of the market. The situation is far more complicated and not nearly as strong as the state would have you believe.

Although Insurance Commissioner Kevin McCarty boasted that Florida had a robust $4 billion in private capital to back homeowners policies, in reality the state has a fraction of that. The St. Petersburg Times and the Gulf Coast Business Review determined the number to be only about $200 million to $300 million. A study by the Washington-based Competitive Enterprise Institute put the figure at $600 million. The rest of that $4 billion goes toward surplus line carriers, which offer specialized insurance for high-risk properties.

The CEI found that only 10 companies, not 40, provide new capital to back typical homeowners insurance policies. Nine of these are Florida-only startup companies. Only one, ASI, runs a multi-state property insurance business and has diversified, multi-state capital.

Some of those smaller insurers haven’t survived the year.

In April, the state took over Hollywood-based Coral Insurance Co. In October the state placed Ponte Vedra Beach-based American Keystone Insurance Co. into receivership. Earlier this month, ratings agency Demotech Inc. suspended Magnolia Insurance Co.’s financial rating.

In September, McCarty told a Florida Senate panel that 102 of the 210 insurers with a “significant presence” in Florida’s residential property market posted underwriting losses in the second quarter. That does not inspire confidence in the market’s ability to respond to a weather disaster. It needs more muscle.

Contrary to Gov. Crist‘s brush-off, losing State Farm would have made a bad situation worse. Without a strong private insurance market, homeowners will be forced to seek shelter in the state-backed Citizens Property Insurance Corp., which already has more exposure to potential property losses than it has assets.

The OIR slowly has been acknowledging that property rates are not actuarially sound and are preventing insurers (including Citizens) from compiling the necessary reserves to withstand a major storm.  It therefore has been approving rate increases averaging 15 percent — the same hike it gave State Farm. But that amounts to barely opening a valve on a boiler that’s building up a lot of steam.

Government regulation has kept premiums artificially low. That has made them affordable in the short term, but they don’t reflect the true level of risk for these properties in the long term. Although homeowners might save now, they potentially are being exposed to a statewide financial catastrophe. Unfortunately, this mind-set is so ingrained that McCarty has opposed, and Crist has vetoed, legislation that merely would allow consumers the option of buying unregulated property insurance.

Florida must make greater strides in restoring a competitive, healthy, diverse, private insurance market. Keeping State Farm in the fold is but one modest step in that direction.