Is the prospect that a party insulated from risk may behave differently from the way it would behave if it were fully exposed to the risk.
A person's belief that they are responsible for the consequences of their own actions is an essential aspect of rational behavior. An investor must balance the possibility of making a return on their investment with the risk of making a loss: the risk-return relationship. A moral hazard can occur when this relationship is interfered with, often via government policy.
You can only call an economy "capitalist" if you are able to reap the full rewards of your risks and suffer the full consequences of your risk. Any deviation from this creates market distortions that generally have many unpredictable and unforeseen consequences.