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Misconduct?

If an agent wrote a TON of insurance on homes in San Francisco -—

If that volume of business would qualify for a bonus -—

If San Francisco was then COMPLETEY DESTROYED, by an Earthquake -—

Should that agent be denied his bonus?

NO!

Back to the insurance model: The agent is rewarded based on sales -— the UNDERWRITER is responsible for risk.

Now, I admit, the mortgage “insurance” was run out of London for a reason: it was never really, truly, “Insurance” but instead a corporate guarantee.

Still, you are painting with a broad brush here, and you should resist the populist urge to “do something” as the cure will be far worse than the disease.

“Hard cases make bad law”!

In this instance, some of the AIG employees getting bonuses wrote the contracts that brought the company down. They were not mere clerks but were policy makers who evaluated the risk and promoted that line of business to their superiors.

Or, to borrow your example, although the earthquake was inevitable, the employees wrote insurance policies on unsound structures.

In either case, if company superiors were deceived about the risk, there is not just malfeasance but fraud, potentially criminal fraud. Send in the G-Men to find out.

This is worth reading:

What Cooked the World's Economy?
It wasn't your overdue mortgage.
By James Lieber

Village Voice
January 28, 2009

http://www.villagevoice.com/content/printVersion/850296