State Farm has stopped accepting homeowner insurance applications in California, citing the growing risk from catastrophes like wildfires and the rising cost to rebuild.

"State Farm General Insurance Company made this decision due to historic increases in construction costs outpacing inflation, rapidly growing catastrophe exposure, and a challenging reinsurance market," the insurance giant said in a statement on Friday.

"It's necessary to take these actions now to improve the company's financial strength," the company added.

According to the Insurance Information Institute, State Farm was the leading company offering home insurance in California.

The decision to forgo coverage went into effect on Saturday. It applies to both personal and business properties. The company said it will continue to serve existing customers, as well as offer personal auto insurance.

The measure is the latest development in what has been a years-long issue in California: insurance companies dropping homeowners because of the growing risk of wildfires.

In recent years, the state has witnessed some of the most destructive wildfire seasons in its history. In 2018, the Camp Fire destroyed 11,000 homes and at one point, displaced nearly 50,000 people. In its aftermath, insurance companies saw huge losses, causing premiums to go up and toughening eligibility requirements to get covered.

California officials have attempted to minimize such efforts, by temporarily barring insurers from dropping customers in areas hit by wildfires and directing insurance companies to provide discounts.

But as wildfires rage on in the state, so has the issue of insurance affordability and availability. Last year, American International Group notified the state's insurance regulator that it will exit the homeowners market.