I do not know what is required for insurance however, typically the cash is insured by what Allan mentioned. I used to be a 1031 consultant and our fidelity bond was $10M for each occurrence and our E&O was 3M. This is a different scenario but i have found 1031 accomodators and escrows tend to read from the same playbook.
On the other side of that, I had a real estate instructor who described a situation where one of his deals died because the escrow imploded mid transaction. He was able to get the funds out but the deal was not salvageable. The greater difficulty and uncertainty I think is, first that the company (as opposed to the bank) goes bust and stops returning calls, and second, that (whether the failure is by the bank or escrow firm) that the client and/or the agent would have to locate and follow with the insurance company.
