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Wealthy people benefit at every step of the legal process. If the sec did this, had bonuses being used to pay fines, people would buy insurance against it, and

Wealthy people benefit at every step of the legal process. If the sec did this, had bonuses being used to pay fines, people would buy insurance against it, and the insurers would pay it if and when it happened. Maybe that would be helpful as insurers would want to do due diligence. But I'm not at all sure that's a solution.

dogma1138 10y ago
Most insurance policies have quite a few clauses under which the insurance won't be paid out fully or at all. For example you can't take out an insurance policy on your house and set it on fire and claim the insurance afterwards. Life insurance policies usually have an "under suspicious circumstances" or "self inflicted death" clauses that restrict the payout of the policy as well as the usual "in good faith clause" so if you have a life threatening condition and you hid it from the insurer you can kiss your policy goodbye. Insurance policies that provide coverage in case of loss of work exist but those are limited to conditions in which you lost your work due to a health issue, got fired etc. and you usually have to meet pretty strict conditions to get any payout from the policy. A CEO can most likely find some insurance company to cover their compensation package but you'll be your ass there will be a "fraud" or "gross incompetence" clause in it that would prevent them seeing a penny.
- deleted 10y ago
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- greenleafjacob 10y ago
  In general this is called adverse selection, and to the extent that the insured can affect the probability of the loss, the risk is not insurable so these clauses are existentially necessary for the insurer [1]. [1]: https://en.wikipedia.org/wiki/Insurable_risk https://en.wikipedia.org/wiki/Insurable_risk
- sfrailsdev 10y ago
  Hmm... but they never admit wrong-doing, fraud or anything they just pay to settle. And the pay out would only be if the SEC or other government body actually went after them. I'm reasonably sure there would be a way, and even if it was a bad bad investment for the insurer to take directly, it could be wrapped in derivatives and chopped up and sold to institutional investors. But perhaps I'm just cynical.
ikeboy 10y ago
You're not kidding. http://www.independent.co.uk/news/business/lloyds-policy-to-insure-against-rogue-traders-1142668.html http://www.independent.co.uk/news/business/lloyds-policy-to-... http://www.bloomberg.com/news/articles/2016-05-26/credit-suisse-s-rogue-trader-bond-falls-short-as-risk-spurned http://www.bloomberg.com/news/articles/2016-05-26/credit-sui... https://www.bloomberg.com/view/articles/2016-05-17/rogue-bonds-and-leveraged-loans https://www.bloomberg.com/view/articles/2016-05-17/rogue-bon... What do you think of Levine's idea in the last one?

dogma1138 10y ago

Most insurance policies have quite a few clauses under which the insurance won't be paid out fully or at all. For example you can't take out an insurance policy on your house and set it on fire and claim the insurance afterwards. Life insurance policies usually have an "under suspicious circumstances" or "self inflicted death" clauses that restrict the payout of the policy as well as the usual "in good faith clause" so if you have a life threatening condition and you hid it from the insurer you can kiss your policy goodbye. Insurance policies that provide coverage in case of loss of work exist but those are limited to conditions in which you lost your work due to a health issue, got fired etc. and you usually have to meet pretty strict conditions to get any payout from the policy. A CEO can most likely find some insurance company to cover their compensation package but you'll be your ass there will be a "fraud" or "gross incompetence" clause in it that would prevent them seeing a penny.

deleted 10y ago
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greenleafjacob 10y ago
In general this is called adverse selection, and to the extent that the insured can affect the probability of the loss, the risk is not insurable so these clauses are existentially necessary for the insurer [1]. [1]: https://en.wikipedia.org/wiki/Insurable_risk https://en.wikipedia.org/wiki/Insurable_risk
sfrailsdev 10y ago
Hmm... but they never admit wrong-doing, fraud or anything they just pay to settle. And the pay out would only be if the SEC or other government body actually went after them. I'm reasonably sure there would be a way, and even if it was a bad bad investment for the insurer to take directly, it could be wrapped in derivatives and chopped up and sold to institutional investors. But perhaps I'm just cynical.

ikeboy 10y ago

You're not kidding. http://www.independent.co.uk/news/business/lloyds-policy-to-insure-against-rogue-traders-1142668.html http://www.independent.co.uk/news/business/lloyds-policy-to-... http://www.bloomberg.com/news/articles/2016-05-26/credit-suisse-s-rogue-trader-bond-falls-short-as-risk-spurned http://www.bloomberg.com/news/articles/2016-05-26/credit-sui... https://www.bloomberg.com/view/articles/2016-05-17/rogue-bonds-and-leveraged-loans https://www.bloomberg.com/view/articles/2016-05-17/rogue-bon... What do you think of Levine's idea in the last one?