IMO, the buyer is responsible for getting payment to the seller, and the seller is responsible for getting the item to the buyer.
Insurance is paid for by the shipper, for the shipper's protection, just like a buyer can buy a money order for his protection, instead of sending cash.
Insurance also gives an added degree of security because it requires a signature, where delivery confirmation does not, IIRC.
When selling, I always ship priority, and always buy insurance and delivery confirmation. Not for the buyer's peace of mind, but my own.
Much as I hate to see you in this situation, I think you brought it on yourself by choosing not to insure your package, and that the responsibility is ultimately yours.
I regret to see this happen, but shipping without insuring is gambling with your stuff, and when you gamble, sometimes you lose.
Maybe since both of you contributed to the problem, you can meet in the middle, split the loss, and both learn a lesson about being more careful. Or, (hopefully) the package was not deliverable because of the bad address or something, and you will eventually get it back.