Please don't get me wrong. I don't work in insurance and I don't agree with the government's solution because it leaves so many customers in the lurch.

I'm stating the facts behind insurance. Earthquakes and other natural disasters are explicitly covered under insurance (with top up cover and out of scope cover). Government destruction is explicitly not. That this situation comes under the clause surprised me too but insurance companies have almost definitely had legal advice to clarify.

I think if you can get your house repaired before September and then move the house then you should definitely do it. It would, however, have potential consequences with the government deal (will they pay for the land but not the house? I'm not sure). It would also be a slow process with insurance so you'd probably be better off paying for the repairs yourself and getting reimbursed by Tower otherwise I'd doubt it would be done in time.

They shouldn’t (word also used advisedly) be there primarily to please their shareholders.

I agree. And they're not. The reinsurers have a far larger say than the shareholders. I don't think people understand how much influence reinsurers have. Insurance companies are obliged to work within their contract with the policy holder. It is not a choice.

This was a government decision.

Exactly

And my point is that insurance companies do not insure for government decisions.

So if your house in the red zone burned to the ground you’d get full replacement?

Seem’s to me fires in earthquake damaged homes would be fairly frequent.

Interestingly, that happened in the 1906 San Francisco earthquake. Most insurance policies at the time specifically excluded cover for earthquakes. So, because there were so many fires anyway, some home owners were setting fire to their own properties so they could claim insurance.

Don’t we call that collusion?

No, because it stated in the policy contract that government destruction is not covered.

I understand how frustrating and upsetting this but it is not a loophole. It is quite clearly stated in your insurance policy that Tower does not pay out for damage/loss caused by destruction by the government. It will likely be in every other company's wording. This was a government decision which is not an insurable event.

Insurance companies have to work within their policy guidelines partially because of the fiduciary relationship they have with their customers (in this case, particularly those customers not affected by the earthquakes) and partially the obligations they have to their reinsurers.
Insurance companies do not work in a vacuum. They are responsible to a number of parties and, as such, must act within the confines of their policy contracts.

It is not the company trying to weasel their way out of paying you.

Like I said, I understand how upsetting it is and I feel for you. It must be a terrible experience. But it is not the fault of the insurance companies.