[Arnt]

You're suggesting that insurers would provide limited liability without having having a stop-loss mechanism themselves.

My guess is that insurers would look for ways to make their risk assessable and stop the potential losses by insuring you only against assessable risks. They'd insure you against a list of types of events, and nuclear war, force majeure, Nick Leeson and Knight Capital wouldn't be on the list.

[wz1000]

Society does provide limited liability, without having a stop loss mechanism. You are defending a system where the cost of catastrophe falls on everybody but the ones who encouraged the dangerous behaviour in the first place.