Property and casualty insurance spreads out risk over a large group of people during the same time period. P&C insurers have it easy. They can pay out claims from the premiums that come in, and take the leftovers as their profit.
Life insurance spreads out risk over a large span of time for the same person. Life insurers have to be more careful. They have to invest the premiums wisely, so that they will have exactly enough cash on hand to pay out the amount of the policy on the expected date it comes due (along with some profit). If the person dies earlier than expected, they could lose money. If the person dies later, they could get more profit. Furthermore, if the investment market is unexpectedly good or bad, that affects the insurer's ability to pay the benefit. Life insurers can rely on the fact that while all people eventually die, they don't all croak at once. There's actually a predictable rate, so if you get enough people to buy policies, you're never paying out more than you take in.
Disaster insurance is more like life insurance, but even harder to pull off, because all those benefits are probably going to be paid at exactly the same time. So what insurers have to do is take that gigantic, elephant-choking payout and let each underwriter take a little bite of it, until it's all accounted for. They're spreading the risk over multiple people, long periods of time, and multiple investors. And even so, thanks to the fact that it is essentially an enforced savings scheme, a big enough disaster would be a shock to the financial markets.
But there's no way around that. If a storm destroys one of your windows, you're going to be buying a new window, instead of some other thing that you may have wanted more. If it destroys your whole town, a lot of money is going to shift from savings and investments into construction.
There is some advantage to having disaster insurance. First off, ordinary people are absolutely horrible at reasonably judging risks. Second, we are also pretty bad at compartmentalizing our savings and investments. If you have a 100-Year Flood fund, and a Yellowstone Goes Kablooie fund, and a Bad Tornado Season fund, and your grocery budget stands at $20 for this month, would you have the fortitude to eat nothing but beans and rice for four weeks? And third, institutional investors manage money better than a lot of individuals, and can take better advantage of the tax laws. It isn't hard to just dump everything into the Fideliguard Some of Everything Index Fund, but some people still put all their money in an ordinary commercial bank savings account, where the interest doesn't even cover the monthly service fees, but it still gets taxed.
But as you say, a lot of those advantages can disappear to just one bad actor in the insurance company trying to cheat a little for some personal gain. The best thing people can do to manage disasters is to be aware of their own risks, and to plan ahead only for those scenarios that have a reasonable likelihood of occurring.