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Hih Insurance Group Collapse

 Hih Insurance Group Fall Essay

Auditor-General's Report to Parliament 2001 Volume Four

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Fall of HIH Insurance

ESSENTIAL FINDINGS The collapse of HIH Insurance (HIH) in early 2001 will certainly significantly affect NSW Government finances: ♦ A $600 million liability (estimated) has become included in the 2001-02 NSW Spending budget. This volume relates to an assistance package build by the NSW Government intended for NSW occupants who have HIH Compulsory 3rd party (CTP) and home-owner warrantee insurance promises. NSW general public sector agencies have $30. 5 million of excellent and potential claims with HIH Insurance. A $28 million the liability (relating for the Workers Reimbursement Act 1926) will now always be recognised in WorkCover Authority from the failure of HIH. Some expense losses will be incurred simply by State organizations holding HIH shares.

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It is recommended that: ♦ ♦ ♦ The $600 million (estimated) liability pertaining to HIH CTP and home-owner warranty insurance claims must be closely watched as such claims are usually controlled by uncertainty and volatility. The regulatory tasks of the Electric motor Accidents Specialist and WorkCover Authority should be reviewed after the causes of the HIH collapse are established. The current framework of the Treasury Managed Finance should be reviewed to determine whether it be beneficial to include all non-budget dependent firms under the cover provided.

A Royal Commission rate into the factors behind the break will survey next year. The liquidator of HIH has got the responsibility of determining the extent in the losses that arise. Whilst this willpower will take some time, early estimates of these failures may surpass $4 billion, making HIH one of the most significant corporate collapses in Australia. FINANCIAL IMPACTS NSW Policyholders Safeguard Fund In the 2001-02 Spending budget the Government declared that it would bring in legislation to ascertain the NSW Policyholders Safeguard Fund. This Fund are going to pay the claims against Compulsory Third Party insurance (CTP) guidelines in force with HIH prior to 31 December 2000 and claims under the Home Guarantee Insurance Scheme for guidelines entered into ahead of 15 March 2001. To get Budget uses, the major liabilities for anyone claims have already been estimated at $600 million, the majority associated with CTP statements. Up to 2004-05 total declare payments are estimated at $476 , 000, 000 and will be financed by: ♦ ♦ two-hundred dollar million through the Budget - $50 mil in 2001-02 and $150 million within the period to 2004-05 the introduction of the Insurance Security Tax (IPT) from 1 July 2001. Special Evaluations

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Auditor-General's Report to Parliament 2001 Quantity Four

The IPT can raise $69 million per annum from all general insurance companies operating in NSW. It will be apportioned on the basis of every single company's talk about of the total premium profits collected in the earlier year from all classes of basic insurance and CTP insurance in NSW. It is common, especially with these kinds of insurance promises, for the estimate of outstanding promises liability to be subject to doubt and movements. It is important that the exposure to the State through the Policyholders Fund can be monitored carefully in order to identify variations for the $600 mil estimate, specifically as further claims experience is established. General public Sector Insurance Claims upon HIH Right after the collapse of HIH, NSW Treasury undertook the to ascertain the extent of lodged and potential claims with HIH from NSW public sector agencies. The most recent estimate of the claims is $30. a few million spread across a large number of entities. A significant part of this relates to a claim by Sydney Normal water Corporation of around $18 mil for the water quality problems of 98. The Treasury Managed Finance (TMF) is known as a self-insurance plan, comprising every budget centered General Govt entities, community hospitals plus some Government authorities. Because indicated over, some regulators had insurance arrangements beyond TMF device collapse of HIH, it has resulted in a cost to the Point out. Volume 6 of the...

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