Prior to about 200 years ago (game world time) the Hazard Coast was part of a much larger political entity (the ‘old empire’) which was all but destroyed by an overwhelming outbreak of Evil and Chaotic Evil forces. That outbreak began elsewhere, but it completely annihilated the civilized empire and all but exterminated the usual player-character races on the continent. Called the ‘Great Horror’, the Evil hordes commanded power so great that in places it destroyed entire cities (leaving only craters behind). Nearly all settlements were pillaged and put to the torch. As near as anyone knows, the civil folk of the mainland were all killed, save only those survivors who fled to (or started off in) the Karagon Peninsula and the Hazard Coast islands.
Popular belief among the folk of the Hazard Coast is that the Great Horror happened because the Good gods were distracted or tricked into fighting some grave battle elsewhere, and left this part of the world unattended during that time. This was planned by the Evil Ones, and swept Good into the sea with a long-prepared massive onslaught. However, this belief stems from a single book by a persuasive author, and he does not seem to have had any evidence beyond his own guesses when writing his work. None of the evil forces gave explanations or any statements beyond bloodthirsty threats and berserk howls, so there is no clue from the enemy. Among the learned community of the Provincial University (which fled, almost intact, from Karagon to Avar Island) and the high ranked priests of the Good gods, there is no accepted explanation: the gods have not yet deigned to tell the mortals the reasons for what happened.
Again for no known reason, the Evil forces of the Horror included very little capacity to cross salt water. There were no ships, only small contingents of aquatic races, and only modest numbers of flyers, and what there were of flyers had only short range or low endurance. The remnants of the Imperial fleets were easily able to handle the attempts that were made to move by sea.
The folk in the Hazard Coast do not know if any other enclaves of order survived the Great Horror: they know of none. What they do know is that the provincial capital, Karagon, was taken and ruined, but the horde was stopped at the narrowest point of an isthmus, where an Imperial marshal made a successful stand and built up a fortification (Goron’s Wall) at that point. This saved the last hundred kilometers or so of the Karagon Peninsula, which remains the only toehold of Good on the continental mainland.