Affordability would be adversely affected in the short term, yes. In the long term, more housing production would be incentivized in less-risky areas. The reduced property prices to come out of this would also mean insurance rates would decrease for them proportionally— insuring for $600k is cheaper than insuring $6m, all else being equal.

On the other hand, affordability will also be adversely affected in the short and long term if nothing changes. Once the moratorium for insurance companies to leave the state is up in about 1 year, and no one can get a mortgage because no insurance providers are left. Banks will not take on the implicit roles of insurers in a no-recourse loan state.

Doing nothing is not an option. The writing is on the wall.