There are fire disasters year after year. Do people think home insurance companies can pay out in excess of the collected premiums on these disasters indefinitely?
Sometimes when it's pointed out that home insurance companies face massive losses when these disasters happen the response is "Oh well, shouldn't have taken the premiums if you can't handle the risk". What do we see now? Companies are saying, ok, we can't handle the risk, good luck with your home. And people are mad at the insurance companies for leaving? How are people this disconnected from the consequences of the government policies?
If you view fire insurance as a disaster fund that pays out during disasters the answer to running out of funds to recover from disasters is to collect more funds before the disaster. The money has to come from somewhere. Even in some world where you're a CA lawmaker and your plan is to successively bankrupt insurers to pay out for the now seemingly annual fire catastrophes that hit the state, you're eventually going to run out of insurers. You can't legislate disaster funds to be less than the cost of disaster forever.
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