It's not insurance fraud (or fraud of any kind). Fraud is theft by deception. Your car fire example is fraud because to get the payout you have to lie to the insurance company about why the car caught on fire. Car insurance contracts quite explicitly exclude coverage for intentional damage, so if you tell them you set it on fire on purpose, they won't pay you.
In this instance, the "insurance" is actually a credit default swap (CDS). CDS contracts do not exclude "coverage" in cases where the "insured" provokes the company into default. There's no need for deception to make the scheme work, meaning it's not fraud.
The CDS contracts are put together by an industry association called ISDA, with a lot of input from very sophisticated market participants and their very expensive lawyers. It was most likely a conscious decision to make the contract work that way. Anybody who got burned by this directly either knew it was possible or should have known it.
In this instance, the "insurance" is actually a credit default swap (CDS). CDS contracts do not exclude "coverage" in cases where the "insured" provokes the company into default. There's no need for deception to make the scheme work, meaning it's not fraud.
The CDS contracts are put together by an industry association called ISDA, with a lot of input from very sophisticated market participants and their very expensive lawyers. It was most likely a conscious decision to make the contract work that way. Anybody who got burned by this directly either knew it was possible or should have known it.