In a sense, it looks like these insurance company's policies work a little bit like regulation. Except that it's not monopolistic (different companies are free to have different rules), and when shit hits the fan, they actually have to put their money where their mouth is.
Despite this horrific outage, in the end it sounds like a much better and anti-fragile system than a government telling people how to do things.
A little bit, probably slightly better. But insurance companies don't want to eliminate risk (if they did that, no one would buy their product). They instead want to quantify, control and spread the risk by creating a risk pool. Good, competent regulation would be aimed at eliminating, as much as reasonably possible, the risk. Instead, insurance company audits are designed to eliminate the worst risk and put everyone into a similar risk bucket. After spending money on an insurance policy and passing an audit, why would a company spend even more money and effort? They have done "enough".
Despite this horrific outage, in the end it sounds like a much better and anti-fragile system than a government telling people how to do things.