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I'm seeing articles about insurance companies withdrawing from Florida and California because of wild fires. Why are they exiting the market entirely instead of just raising prices to account for the higher risk?
In a broader sense than what the commenters below added, there are various scenarios where market failures exist because of information asymmetries. I.e., person A knows about x and person B does not, so they can't come to terms they both find agreeable. In this case there has to be some kind of intervention by the government or another third party for things to work; classic examples for this would be used cars and health insurance.
Insurance companies have a much more sophisticated understanding of wildfire risks than the average person. Throw in some other cognitive biases (humans generally don't organize their finances in 50 year windows), and there are going to be places where insurance companies essentially feel obligated to raise rates to the point where humans will not pay them. Hell, auto insurance is something comparatively much simpler for both issuer and seller and governments generally still have to force drivers to buy it.
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