My understanding is that there is a risk of extremely high voltages in ungrounded systems with some types of fault.
The thing to remember is that there is no such thing as a true 'ungrounded' system. Instead you have solidly grounded systems, resistance grounded systems, and _capacitively_ grounded systems. What is normally called ungrounded is in fact coupled by capacitance to ground.
If you have a single _solid_ phase to ground fault in an ungrounded system, then the voltage of the two other phases will immediately jump to the full voltage of the system. That part is easy to understand and expected, and the insulation system is supposed to be capable of dealing with the full voltage.
But if you have a 'restriking' fault, where you get conduction for only part of the AC cycle, then you can charge up the system capacitance relative to ground, and get a conductor to ground potential that is several times the normal system voltage. This can rapidly degrade insulation systems.
-Jon
