A while ago it was the same with fuses on branch circuits. Everytime the insurance policy changed, (when a new owner got the house.) surprise... Panel upgrade!
I imagine that if you must replace the K&T, you'll be dealing with possibly a few fused panels too. Possible lack of grounding etc. I guess it can only stop short of the street, or can it?
An un-edjucated buyer beware.... "What a nice place, I spent my whole wad on it, now I have to completely gut it?!?!"
Not sure how the insurance companies got so much power, but they seem to go through phases of wielding it well with an amount of common sense, and becoming total dictators.