Actually, problem chapters do get shut down by their national organizations on a fairly regular basis. Most NIFC fraternities follow a similar process. If an individual chapter gets in trouble for a relatively minor offense (underage drinking, unsanctioned parties, “wet rush” etc.), the national organization will usually be content to let the university dole out whatever punishment it deems appropriate. If the chapter engages in serious misconduct, like hazing or sexual assault, the national organization will come in and conduct a “membership review.” Essentially, the national organization will interview every member of the chapter to determine who, if any, get to stay and who gets kicked out. In some cases, the national organization will determine the chapter’s problems are so pervasive that it will impose the death sentence - shutting the chapter down and recolonizing in 3-4 years when most if not all of the old chapter members will have graduated.
I also want to address the statement BoolaHI made regarding fraternities being self-insured. It is true that fraternities are one of the most expensive risks to insure and have been for several decades. However, most NIFC fraternities do not “self-insure.” Instead, the majority of NIFC fraternities have joined together to form the Fraternity Insurance Purchasing Group, a type of risk pooling agreement that is also common with smaller municipalities and utility districts. There may be one or two organizations that are truly self-insured as that term is used in the insurance industry, but most NIFC fraternities are not.