Both are by design. Array covariance is a common design mistake in OOP languages, which the designer of TypeScript had already done for C# but there they at least check it at runtime. And the latter was declared not-a-bug already IIRC.

TypeScript designers insist they're ok with it being unsound even on the strictest settings. Which I'd be ok with if the remaining type errors were detected at runtime, but they also insist they don't want the type system to add any runtime semantics.