NEW YORK (Reuters) - Allstate Floridian, a unit of Allstate Corp. said Friday it would allow newly-formed Royal Palm Insurance Co. to offer property insurance coverage to 120,000 of its customers in Florida .

Royal Palm will provide property coverage through more than 900 Allstate agencies across Florida, Allstate said.

The "vast majority" of the 120,000 Allstate Floridian policyholders will not be offered renewal by Allstate when their current policies expire, but can get coverage from Royal Palm or other insurers, Allstate Floridian said.

Allstate is in the process of shedding its exposure to hurricane-plagued Florida, which has suffered more than $38 billion in insured damages in the last two hurricane seasons.

Bob Daniels, a spokesman for Allstate, said his company and Royal Palm, a company formed by a former Florida state senator, had tentatively agreed that Royal Palm would take over the responsibility and the risk exposure for the 120,000 customers as of April 1.

Daniels said Allstate Floridian would remain a major insurer in the Florida market. At the end of 2005, Allstate Floridian had 650,000 Florida customers.

Florida is "the nation's most challenging property insurance market," said Phil Lawson, president of Allstate Floridian in a statement. Florida has been hit by five hurricanes in the last two years.

Allstate (down $0.91 to $56.40, Research), the Northbrook, Illinois-based parent company and the nation's second largest home insurer, has left the state, and turned over its business to Allstate Floridian.

In turn, Allstate Floridian has been moving customers to other insurers. In 2005, Allstate announced a similar agreement for 95,000 customers with Universal Insurance Holdings Inc., a Fort Lauderdale, Florida company, Daniels said.

"This is a continuation of our strategy," he said.

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