The Insurance Industry never struck me as being particularly logical, more like a roller coaster and I am not here to defend it.
I had dealings with the US before coming here but corporate not personal insurance.
I was surprised at how controlled everything is, regulated at the State level, this is not normal and it never occurred to me that this would be the case.
So each State is different, sort of like dealing withe different Countries, and in CA rates had to be approved and justified using historical date but the cost of reinsurance could not be included, which is weird.
I assume as long as the Insurance Companies were making money they went along with things, as I mentioned things started unravelling, the gov set up the FAIR plan, more catastrophic events, and the Insurance Commissioner is a political appointee so the market became more and more distorted.
It also encouraged? people to build in areas where logically you would not if the full cost of the insurance risk was taken into account, sort of like Florida, well some people can, would but if you have a mortgage, need Insurance as apart of that and the full cost was taken into account, perhaps you would not or build very differently.
There has been a sort of similar situation in the UK with new housing developments being built on historical wetlands and guess what they flood, duh. I remember going down the M4 a lot and past an area that was always wet in the winter and wondered why on earth they subsequently developed the area,
Anyway this is on a much bigger scale, and with the continuing effects of distorting the market I am not sure what the answer is, the State can try and put pressure on the Insurance Companies but if they cant see how they will ever make any money the logical response is just to pull out as many have done and more will do, which will of course just put pressure on those that remain.
I suppose there is a solution but not quick or cheap or likely to happen