This is all a moot point though: you cannot force companies to offer insurance. If regulations prevent them from offering policies at a profit, they just leave. Which is exactly what is happening in California (and Florida): every company is bailing out and refusing to renew policies.
In insurance the problem is even worse, because you can’t compute what a reasonable profit cap is. Because of tail risks, you often see insurance companies making a profit of $1b each year for 30 years, then suffering a loss of $40b. Looked at during the typical year you might conclude the profits are excessive, but over a long term it might become apparent that the average profit is actually zero or even negative.
As is often the case, more competition and better competition policy is the solution.
Insurance is an industry with great cashflow. They should be able to keep any profits they make off of investing the premiums, but not the premiums themselves. The incentives just do not line up, they siphon off the money and scream about over regulation before they need to get bailed out.
Or an insurance company that went bankrupt?
Insurance companies are already highly regulated (especially in CA). There are regulations around how much money has to be held in reserves to pay claims. There are regulations around what investments can hold reserves in.
Hell in CA, there are regulations around how premiums can actually increase and a mechanism for returning “excess premiums” back to policy holders.
In fact those regulations are one of the reasons insurers are leaving CA. They can’t increase premiums sufficiently to cover risk.
You can read all about them: https://www.insurance.ca.gov/01-consumers/130-laws-regs-hear...
Yes. There were 6 insurance companies that went bankrupt in Florida in 2022. I am surprised you didn't know insurance companies go bankrupt all the time due to mismanagement.
https://news.climate.columbia.edu/2022/11/03/with-climate-im...
Insurance should not be used as a profit source. It is antithetical to the purpose of insurance.
Regardless, the Florida examples are eligible for FIGA insurance that covers claims that insolvent insurer can’t.
Money spent to repay loans or to make reserves are not profits.
I’d really argue that for-profit insurance companies are a bad idea in general, but that’s a higher-level debate. There’s an interesting idea where governments handle all disaster-related insurance handling but are then also able to have a more comprehensive approach to management (though that’d be hard to trust in the current US political climate).