From what I recall, back in GalCiv 2, when a faction died, their B/P/M (or Good, Neutral, Evil as it was called) would decide what would happen to the ships. Good would have most of the ships go to like minded/alied factions. Neutral would see some go to allies/like minded factions while others go pirate. And Evil would ALL go pirate, regardless.
Personally I'd like to see that mechanic come back in some form rather than all ships go pirate when a faction goes bye-bye.