State Farm announced last week it would stop accepting applications for all business and personal lines of property and casualty insurance, citing inflation, a challenging reinsurance market and “rapidly growing catastrophe exposure.” The decision did not impact personal auto insurance.

“We take seriously our responsibility to manage risk,” State Farm said. “It’s necessary to take these actions now to improve the company’s financial strength.”

Allstate, another insurance powerhouse, announced in November it would pause new homeowners, condo and commercial insurance policies in California to protect current customers.

“The cost to insure new home customers in California is far higher than the price they would pay for policies due to wildfires, higher costs for repairing homes and higher reinsurance premiums,” Allstate said in a statement.

California’s unsettled market aligns with trends across the country in which companies are boosting rates, limiting coverage or pulling out completely from regions susceptible to wildfires and other natural disasters in the era of climate change. Florida and Louisiana have struggled to keep healthy insurance markets following extensive damage from hurricanes. Premiums are rising in Colorado amid wildfire threats, and an Oregon effort to map wildfire risk was rejected last year because of fears it would cause premiums to skyrocket.

Scientists say climate change has made the West warmer and drier over the last three decades and will continue to make weather more extreme and wildfires more frequent and destructive. In recent years, California has experienced the largest and most destructive fires in state history.

Some California homeowners already are going without coverage, and a shortage of new policies could make it more difficult to buy a home. A state-run pool that serves as the insurer of last resort for many could face pressure as enrollments surge.

The state pool — the California Fair Access to Insurance Requirements Plan — provides basic fire insurance coverage for properties in high-risk areas when traditional insurance companies will not. Enrollments have jumped in recent years to 272,846 homes in 2022.

“We just don’t have a stable insurance market,” said state Sen. Bill Dodd, a Democrat from Napa, whose Northern California district has been charred by wildfires. “What’s happening is a lot of people in my district and frankly other districts are … going naked — they have no insurance.”

According to data compiled by the industry-supported Insurance Information Institute, California has more than 1.2 million homes at risk for extreme wildfire, far more than any other state.

“The number of acres burned in California has grown steadily in recent years, as more people are moving into fire-prone areas of the state,” the institute said in a statement on the company departures from California. “More homes in harm’s way — combined with rising costs of repairing or replacing houses either damaged or lost to fire — leads to increased insured losses.”

In Colorado, which has been hit by devastating wildfires, insurance premiums have been rising significantly, and some smaller insurance companies have been pulling back from covering properties. A study commissioned by state lawmakers found that 76% of carriers decreased their exposures in Colorado in 2022, leaving the five largest insurance companies to dominate the market.

Florida has struggled to keep the insurance market healthy since 1992, when Hurricane Andrew flattened Homestead, wiped out some insurance carriers and left many remaining companies fearful to write or renew policies in Florida. Risks for carriers also have been growing as climate change increases the strength of hurricanes and intensity of rainstorms.

Louisiana is in the midst of an insurance crisis, exacerbated by hurricanes Delta, Laura, Zeta and Ida in 2020 and 2021. As claims piled up, companies that wrote homeowners policies in the state went insolvent or left, canceling or refusing to renew existing policies.

In California, the loss of large insurers could create more pressure to loosen consumer-minded policies that have held down rates in the state for years. Voters approved Proposition 103 in 1988, which allows the state insurance commissioner to reject proposed rate increases and order refunds. It has been credited with saving consumers billions of dollars, but the industry says it places constraints on accurate underwriting and pricing risk.

Last year, Insurance Commissioner Ricardo Lara advanced regulations requiring insurers to give discounts to customers if they followed new standards like building fire-resistance roofs and creating defensible space around their homes.

Before their announcements, State Farm and Allstate both had been seeking significant rate increases.

Consumer Watchdog, a nonpartisan advocacy group, said State Farm’s decision was unlawful.

“Insurance companies can’t just stop selling insurance to consumers in order to make more money for themselves,” Harvey Rosenfield, the author of Proposition 103 and the founder of the group, said in a statement. “They have to open their books and get the (state) insurance commissioner’s approval.”

Lara’s office didn’t respond to an email request for comment.

A state website lists more than 100 companies selling residential insurance, though some offer only limited lines of coverage, such as earthquake or renter insurance.

[This headline has been corrected to clarify that Allstate and State Farm are pulling back from the California insurance market, not pulling out entirely.]