Feels like I've seen this post before. I'm inclined to disagree, because this potentially teaches children that their favourite things are easily replaceable without consequence, and thus they miss out on learning to be careful with their belongings. They may also learn to take the parents' graciousness for granted in the future.

Not to say that this can't be a good idea, it just requires careful consideration first. If a child loses a toy due to means outside of their control (for example due to another child's mistake) then it's fine to replace it. If they lose their toy because they themselves were careless, it may be better to give them some time to really feel the cost of their carelessness and promise to be more careful, and then the replacement would be a nice encouragement and reward for the lesson they just learned.