I don't think there is any legal requirement for them to have insurance. All it means is that should an unfortunate event occur, they will be personally liable, and that any venue may (at their own discretion) demand that such insurance be in place to cover their own position.

If they dance in a public place, it is up to them to assess the risk (which may be done informally, such as "looks OK here") and decide if they could possibly injure someone or damage property. If the risk is low, go ahead.

But a festival will have stricter conditions, as the organisers will be putting themselves on the line without much control over what the performers do. They may also be renting the site off a landowner who quite reasonably will see himself as taking (for him) unassessable risks. Under these circumstances, it would be reasonable to require that performers are insured.

There is legally nothing as far as i'm aware to stop them from performing outside the festival, in a public place; but be aware that the local bureaucracy might make this an issue with fuure licensing if they were to find out.