Reinsurance is not, unfortunately, an unlimited resource. There's a reason why the insurance companies after Katrina just closed up shop and reopend under a new name and left all those victims uncompensated. They too had reinsurance.

Reinsurance payouts are slow processes and - on the scale of catastrophe's - can take years to be completed. In the meantime, you balance sheet is showing a massive expense all at once, meaning for several quarters you are officially reporting a loss to your investors. That's bye-bye executive bonuses, quite likely 'CEO fired by board' and endless other corporate catastrophes before the reinsurance finally lets you settle things out - assuming you aren't out of business before that can happen.
Easier to just liquidate the wholy-owned subsidiary which holds the contracts anyway, declare it bankrupt with yourself as biggest creditor,  and reform the company with no claims liability.

Grossly unethical, even fraudulent ? Yes. Still shockingly common.