No one can truly afford to live there, if you price in the cost of insurance. The only reason people live there is because they haven't hit the 1/100 chance yet.

There are plenty of very rich people living there who can afford the house burning down every single year. So false.

Afford doesn't mean you can technically throw money out the window. At some point, you are going to give up if the risk is high enough to have >2 events in your lifetime - time is also a cost to factor in, as well as loss of possessions. It's not quite that simple.

If you’ve actually done the calculations with real numbers share the math. Otherwise stop assuming the conclusion.

The calculation was done by the insurers who refuse to insure the area, or must subsidize all insurance with nearby policies.

Surely there are rates at which they’d would insure the area? And you have shared no data on who is or is not willing to pay those rates.