The Office of Insurance Regulation in Florida ordered Praetorian, the subsidiary of Australian insurer QBE Insurance, to cut its home insurance premiums by one-third. QBE actually offered to reduce its rates by 2.2 per cent, but Commissioner Kevin McCarty asked the insurer to cut it by at least 35 per cent.

Analysts estimated QBE would lose between $150 million and $200 million if it would follow the regulator's order over two class action suits faced by the insurance firm in Florida, which has been badly hit by repossessions.

Thousands of homeowners charged lenders and QBE with collusion, profiteering and kickbacks in the forced-placed insurance policy which banks mandate to protect their loans in case homeowners fail to meet their mortgage payments.

QBE denied the charge and defended its rates which is 14 times allegedly higher than similar insurance policy and reflects Florida's high rate of catastrophes such as hurricanes.

In ordering the cut in insurance rates, the regulator said that Praetorian failed to prove that its expenses led to excessive cost in relation to services rendered.

"Upon review of the information and data submitted by you and upon the office's review of the data utilizing more than one model, the resulting indications demonstrate that a reduction of 35-36 per cent is required," the notice, quoted by The Sydney Morning Herald, read.

Florida's foreclosure rate is among the highest in the U.S. with one in every 340 homes receiving a foreclosure filing in May. Investors are wary that other state regulators may follow Florida's lead and forced other insurers to also drastically reduce their premium rates.

On news of the regulator's order, QBE shares declined 54 cents or 3.7 per cent to $13.85 on Tuesday, reversing the almost 20 per cent recent gains on shareprices. Florida accounts for 25 to 30 per cent of QBE's mortgage insurance business in the U.S.

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