The alternatives are the L0 emulates a hypervisor-privileged mode to the L1 which would be a performance cost (and does not really avoid the problem since the L0 would have to emulate vmenter/vmrun and therefore be aware of the L2 anyway, or the hardware would have to provide some nested virtualization facility which seems like it would be complicated and expensive for little benefit, though I could be mistaken.
Does anything do a "real" nested virtualization in hardware? s390 might but I know ~nothing about it and it probably does not expose its bare metal hardware layers to Linux/KVM anyway.