We are still in an environment where carriers are extremely sensitive to claims, especially those that don't arise from catastrophic weather events (at least in the Midwest market). 

I believe it tends to give me a slightly lower return, because the sponsor is going to be more careful, and if there is a severe downturn will prevent me from taking catastrophic losses.

You may want to hire a PMC to run it as you learn more - to avoid catastrophic mistakes!

We can strip a lot of coverages off that are fairly cheap that could severely impact the claims process in the event of a catastrophic event.

Then since your property is insured, if a catastrophic unforeseen event occurs, like the entire town burning down ala Pacific Palisades CA, you don't suffer catastrophic loss (well, it's catastrophic, but you have the option of taking the money and leaving.

Let's say it's a catastrophic injury and the damages exceed your GL coverage which has a $1M limit.

That being said, there haven't been very many homes lost to such, so it still seems odd that Proper would opt out of insuring STR's in our region, and makes me wonder if there are other reasons at play...such as the risk of more catastrophic floods...the risk of another deluge of lost rent claims...etc.

I highly recommend finding a market that is landlord friendly, cash flowing, doesn't have regular catastrophic events, property taxes are low, insurance rates are under control and you like the area.

However, Lane was the only one that saw catastrophic loss.

Our concern is further damage being done after we take ownership and before the squatters are removed, like something catastrophic is our main concern.