WASHINGTON — The largest U.S. residential insurer said yesterday it will stop selling new homeowner and commercial policies in storm-damaged Mississippi because of lawsuits and legislative saber-rattling over the company's handling of claims from Hurricane Katrina.

The decision by State Farm Insurance Cos. is the latest by a major insurance company to reduce its risks by retreating from the nation's coastlines. Allstate Insurance has canceled or weakened coverage, or refused to write new policies in more than a dozen coastal states, including Mississippi, Louisiana, Florida and Texas.

"We've reluctantly come to the conclusion that it is no longer prudent for us to take on additional risk given the uncertain legal and business climate" in Mississippi, said Fraser Engerman, a spokesman for the Bloomington, Ill.-based insurance giant.

State Farm wrote 30,000 new homeowner policies in Mississippi in 2006. It is the state's largest residential insurer with a 30.3 percent market share, according to A.M. Best, an insurance rating and analysis firm.

State Farm's move turns up the heat in an already fevered legal and political face-off between the company and some of the state's most powerful figures.

It follows by three weeks a decision by U.S. District Judge L.T. Senter Jr. to reject the insurer's proposed settlement of lawsuits involving 200 Mississippi homeowners because the plan did not guarantee payments to most policyholders. State attorney general Jim Hood has launched a criminal investigation of the firm's handling of Katrina-related claims.

Meanwhile, U.S. Senate Minority Whip Trent Lott, R-Miss., and Rep. Gene Taylor, D-Miss., both of whom lost homes to the storm, have announced plans to yank the insurance industry's longstanding and highly valued antitrust immunity.

Mississippi's legal wrangling with insurers stands in marked contrast to the state's stoic early reaction to the August 2005 hurricane. Then, Mississippi Gov. Haley Barbour, a longtime Republican power broker, voiced little criticism of the Bush administration for its sluggish response to the disaster, unlike his counterpart in neighboring Louisiana, the other state walloped by Katrina.

But the rash of lawsuits — and the federal court's apparent willingness to see the cases move forward — has touched a nerve with insurers.

"What's going on here is that the certainty of (insurers') contractual arrangements are being undermined," said Howard Kunreuther, a University of Pennsylvania economist and risk expert. "If there isn't a well-defined contract, no insurer is going to be comfortable offering coverage."

Longtime state insurance commissioner George Dale said State Farm's decision on homeowner policies "further complicates the situation on the Mississippi Gulf coast" — where, he said, all the state's major insurers have announced they will no longer cover wind and rain damage. But Dale also said State Farm's action came as no surprise.

"Insurance companies can insure anything if they've got predictability," he said. "But with all these lawsuits flying around, they don't have predictability."

Engerman refused to say how many households might be affected by the company's move. Asked whether the no-new-policy decision would apply only to new customers or also to old ones whose coverage is up for renewal, the spokesman said, "We continue to assess our position ... to determine what further steps, if any, are necessary."