Westbrook will lose one of its largest employers when insurance company Disability RMS relocates to South Portland in February 2016.

City officials announced the move Friday soon after a meeting with Disability RMS President Matt Gilligan, who said the company could not resolve issues in renegotiating its lease at One Riverfront Plaza, adjacent to the Dana Warp Mill.

Bill Baker, the assistant city administrator for business and community relations, said Saturday that the news was “of grave concern to us.”

Mayor Colleen Hilton said in a press release Friday that the city is “extremely disappointed to be losing Disability RMS, which has been a great corporate partner, an important presence in our downtown and of course a major employer in the city.”

Since its move to Westbrook in 2004, Disability RMS has grown steadily. Previously, employees were scattered in four locations around Portland.

The company, a provider of disability risk management products and services, now has more than 350 employees. In a 2006 survey, Disability RMS was named the best company with more than 200 employees to work for in Maine by Pennsylvania-based Best Companies Group.

In 2007, the company said that it had “no plans to leave” Westbrook. Instead, the company spoke about expanding. The company leased the entire building, although one floor was vacant.

According to Friday’s press release, Westbrook officials learned in October that the company was struggling to renegotiate its lease with the landlord, Pendleton Westbrook LLC, based in Hackensack, N.J., and that it had begun looking at alternative space.

Baker said that he traveled to New Jersey a few months ago to discuss options with the landlord, which brought the sides closer together, temporarily.

“Both sides indicated they were making progress, but they were offered economic incentives that were apparently impossible for the landlord in New Jersey to match,” he said.

“It is important for the Greater Westbrook business community to understand the effort the city of Westbrook made to keep this from happening,” the release said.

Baker said the company received an offer from a private landowner in South Portland, who was in the “unique position to offer financial incentives to DRMS.”

The company will move to the Southborough Office Park in South Portland.

“Westbrook is a superb place to do business and there are many reasons why we wish the outcome had been different and we could continue to thrive here,” said Gilligan in the release.

Baker said in the press release that he had already been in touch with Pendleton Westbrook in order to “begin the process of filling this 125,000-square-foot building with new tenants.”

Baker said Saturday that while “it’s up to the market what happens next,” the city can work “aggressively with the landlord to try to deliver some quality new tenants.”

“We remain optimistic for the future of our downtown and this building in particular, and expect to have this building fully occupied and bustling before February of 2016” said Baker.

The Disability RMS building, One Riverfront Plaza, overlooks the Presumpscot River.