State Farms played “smart business” here. They likely knew of the conditions in and around this area and decided it was not in their best interests to insure houses in a “high risk” area.
“...not in their best interests to insure houses in a “high risk” area.” High risk is only high risk to an insurance company if they cannot collect premiums sufficient to cover losses. To a point high risk means more premiums and better profits.
I suspect that CA’s FAIR plan did it. That and lack of reinsurance.