Unfortunately, modern markets are empirically fairly poor at optimizing for long-term outcomes with all externalities accounted for (example off the top of my head: the Deepwater Horizon oil spill).
When a major malfunction or accident does happen, no penalty or fine is really sufficient to bring about any meaningful sense of justice. (Think again the oil spill, or a tainted staple food poisoning tens of thousands of people, or to use a really cliché example, a malfunctioning UAV crashing into a group of kids playing at recess.) As the accidents are often due to incompetence or attempts at cost-cutting rather than outright malice, the deterrence factor of the penalty doesn't really apply – to those guilty, it just looks like they're taking the good kind of risk optimizing their systems until it's too late. The guilty corporation simply can go bankrupt and out of business, and finding and then charging personally responsible employees isn't always easy.
While government regulations might not be the most efficient, they do not cloud a picture of exactly how safe a plant is and will remain that would otherwise be perfectly clear. Short of each investor evaluating safety of each plant, oil rig, and factory themselves, the situation with government regulation removed would boil down to an analogy to the S&P credit rating business. We've seen how for-profit independent third-party rating business has worked out.
If you'd like an example from a market with little regulation, look no further than Bhopal.
I'm not going to argue that the current regulations we have in place are amazing. They're not and they can certainly be improved. I will, however, argue that they do a better job keeping us safer than the free market, as it has been implemented worldwide over the last century, would.