Are all members of the risk pool using the same model and prompt, and are in the same industry? If yes, then the insurer did a poor job of varying their customers like parent said. If 100,000 customers have exposure, there better be 1,000,000+ others not exposed.
Insuring against localized risk is an old hat for insurance, fire and flood insurance for example, and is generally handled by having lots of localities in the portfolio. This works very well for once-off events, but occasionally leaving localities is warranted when it becomes impossible to insure profitably if the law won't let insurers raise premiums to levels commensurate to the risk.
