> because a fundamental problem in Solidity
Problems in Solidity are a systemic risk faced by all contracts and are thus not something that can be hedged within the system.
Correspondingly, fixes to VM bugs are the sort of thing that the hard fork mechanism is good for. Hard forks that fix flaky VM behavior are uncontroversial.
While there are many applications of insurance products, the use case I am referring to above has to do with specifically insuring the expected behavior of a smart contract.
Suppose I write a smart contract that "rounds up" a user's transactions for a day and donates the rest to charity. I describe the contract verbally as "This contract lists all the transactions your account made that day, rounds to the nearest ETH, and donates the difference to account xyz which is associated with the American Red Cross fundraising division.
There are several aspects of this contract to verify. First, does the logic in the code do what the verbal description says it does. Are there any mathematical errors? Can it run more than once in given 24 hour period? Is the id associated with the Red Cross actually linked to that organization?
If a trusted third party vetted the contract and claimed that its claims were true and that 800 people had used it that day to donate, I'd likely consider it worthwhile to trust that contract.
Similarly, if a third party offered an insurance smart contract that would charge me a tiny amount of Ether to guarantee that the contract would behave as expected within a 10 year period, I might feel comfortable buying that contract. If that third party was unknown to me I might rely on recommendations from others, etc.
The point is that trust builds upon trust. One sort of vetting can help buttress other layers of vetting. This is no different than trust in meatspace, only the characteristics of the blockchain make some kinds of trust easier to realize.