Because insurance companies are generally in the business of insuring unsystemic risk.
The entire model breaks down in cases of systemic risk, unless that has been accounted for and dealt with. Which is why it's a major element of insurance policies.
In Chile the insurance companies have fine print saying they won't cover injuries resulting from paramilitary activities (reasonably sensible, OK) or anything nuclear, right down to a nuclear bomb.
Even in the US it is common for home insurance to not cover nuclear war -- mine specifically says it doesn't for example. Although I suspect not getting an insurance settlement would be the least of my concerns in that event.
Today you can insure against systemic risk through re-insursnce in other countries.. this should be a benefit from globalization, right?
So why we keep allowing insurance companies to make these exclusions?
If there is systemic risks to the entire planet, then an insurance company should just go bankrupt.. I mean the survival of a company isn't very important if we talking about the apocalypse :)
> So why we keep allowing insurance companies to make these exclusions?
In general, we don't have to "allow" contracts between two private parties to happen. We can "not allow" (i.e., outlaw) certain contracts, but an insurance company and a private party can (and should!) set up the contract between them however they please. Especially in a case like this, where the contract is huge, and probably had teams of lawyers from both sides going over all its details.
The entire model breaks down in cases of systemic risk, unless that has been accounted for and dealt with. Which is why it's a major element of insurance policies.