It may not be uninsurable, but pretty clearly trying to use insurance on the platform to insure against risk that are in some sense endemic to the platform seems quite misguided.
Absolutely, the risk posed by a malfunctioning VM is a systemic risk that applies to the entire platform. So there is a chance that contracts impacted by a VM bug could be unreliable across the pre and post bugfix VM. The insurance contract could be one of these.
However, all things considered, I think it's interesting to contemplate a binary future "contract" about whether there will be a VM-bug-necessitated ETH hard fork in the next 30 days. What would the ideal exchange be to take a position on that future? I think it would probably be a different, but largely similar, smart contracts platform very similar to ETH, possibly even ETC.
Notably the meatspace financial system does a horrible job at identifying much less hedging against systemic risks. Identification is hard because the interactions between multiple regulatory systems and ambiguous and variable enforcement mechanisms are nearly impossible to model or to understand. It's like having a bunch of inter-related contracts all of which run on their own buggy VM.
The meatspace system seems very stable until you realize that it's highly brittle. It's impossible to meaningfully measure firm solvency risk, because the behavior of the "VM" is so unpredictable.
Actually, it's not. Regulators and ratings companies do a pretty good job of it, and in extraordinary Great Recession type events there is usually concerted response to keep consumers from incurring any losses. Insured not getting paid due to counterparty issues is a blue moon, black swan risk for business, virtual never happens to consumers.
The great thing about the modern economy is that capital is readily available, but that doesn't mean that the massive misallocation of capital over a period of decades lacks significant consequences.
Many of the dollars mis-invested into real-estate related investments brought on by tax loophole, sloppy (if not corrupt) regulation of downside risk scenarios, and the undemocratic socialization of risk via the GSEs were all things that had a massive social cost.
To argue, as the GP does, that the regulation and management of the crisis was a success by pointing to a few selected asset prices that were the focal point of knee-jerk populist reactions to the problems is a fairly absurd way to claim success.