How come distilled water hasn't replaced transformer oil as a high voltage insulator?
Water is good for making coffee but in electronics over time, it causes rust , and rust particles cause static discharges which drastically reduces the breakdown voltage of the insulation.  

Even epoxy coated stainless steel will eventually emit particles of  rust thru, enough to degrade water to cause partial discharge which detonates particles and evaporates the medium.  This can cascade like lightning to cause a massive explosion.  The same can occur in oil, but unlike water TFMR oil has a Dk of only 2 and can support anti-oxidizer additives.

Worse yet, the polar properties of water make capacitance and lower the self resonant frequency. H20 has a dielectric constant Dk= 80 or about 20x worse than oil lowering the impedance of coils and self-resonant frequency.

Oil also has the same pristine breakdown voltage or BDV of 75k/mm or 75MV/m but that comes at cost of post-processed pressured , high temp moisture and particle removal to the parts per billion level so regulator transformer oil only must pass 25kV/mm and higher levels require in plant contamination removal equipment worth >$50k.

So if you don't mind the creapage effects in contaminated water, reducing the breakdown voltage from 70kV/mm to 1kV/mm go ahead and use it.