Ms. Pauli said that years of individual state insurance rate suppression in catastrophe-prone areas have driven carriers to take the “last available step to protect their corporate assets–exiting those markets.”

David Bradford, editor-in-chief at the New York-based research firm Advisen Inc., said the sponsorship by U.S. Senator Trent Lott, R-Miss., of a bill repealing the antitrust exemption for the insurance industry is an example of the kind of backlash that could be expected in the wake of carriers cutting back on their exposure in catastrophe-prone areas.

Mr. Bradford said no insurer would cut back writing policies in any state if they did not think it was in their financial interest, despite what he termed the increasingly hostile business environment in the state.

Mississippi-based plaintiff's attorney Richard Scruggs expressed disappointment with State Farm's decision, calling it an extreme reaction to U.S. District Judge L.T. Senter's decision not to accept a settlement worked between the carrier and thousands of Gulf Coast homeowners.

“Our legal team will continue to pursue this balanced resolution to head off an all-out economic war for our state,” he said in a statement. “It's time for everyone to take a deep breath and think through the consequences of their actions.”