Comment by bell-cot
> There is only one reason why...
Not true. Assume for the moment that you're the CEO of Golden Insurance Co., and you're still writing fire insurance policies in Burn County, CA. After Yet Another massive fire - and loads of "100% loss" payouts - from your balance sheet - the experts in your Risk Estimating Dept. say the premium to insure a $600K house in Burn Co. needs to be $200K/year - because they expect to pay out to replace that house ($600K) every 4 year ($150K/year), and they need the other $50K for overhead and temp. relocation benefits and rebuilding-cost inflation and a bit of hedge - just in case they're wrong, and things burn down even more often.
Now - if the fire insurance for a $600K house costs $200K/year, how many of the homeowners can and will actually pay that much for fire insurance? Perhaps a number that's falling like a rock? Meanwhile, Wall St. is howling about the horrible risk that your balance sheet is facing, if there's another big fire season. And the 99% of homeowners who can't afford those premiums are bitterly angry, and in a mood to string up the bearer of bad news (meaning you) from the highest tree still standing.
SO - why wouldn't you, as CEO, make the unfortunate decision to just stop writing fire insurance policies for properties in Burn Co., CA?
The answer amid a lack of regulation is NumptyCo sells a policy for $10k, pays most of that to its owner, and declares insolvency at the first sight of a claim.