On March 15, 2001, Australia¡¯s second largest insurance company HIH collapsed and an application for its liquidation was submitted. It soon escalated into Australia¡¯s biggest corporate failure in June after the insurer¡¯s final tally of losses was estimated to be about $3 billion in Australia and almost $5 billion worldwide, very well above the early estimate of $1 billion . HIH¡¯s demise was mainly due to the criminal and unethical activities that the company directors committed, as well as risk management practices and poor decision-making. As a result, most HIH¡¯s creditors, policyholders, shareholders, employees and many other businesses and departments, who are innocent victims, have been enormously affected.
In the early 1990s, HIH quickly expended business overseas through the Europe and the United States. However, it did not have the control in place. HIH started to reinsure from 1997 and it had been accepting too many risky insurance claims from other insurance companies. Thus, it did not set aside enough capital to pay out over a number of years to policyholders. For example, HIH paid couples of hundred million dollars to cover workers compensation in California by raising its premium rates in another countries. Mea
. . .
Consumers and policyholders, like Mr Gurtner, deserved to have a proper explanation and helpful assistant from HIH. The Federal Government will make a royal commission to work with APRA and ASIC in the investigation for HIH. McGrath said: ¡°it is likely that the ultimate return to creditors across the board will be within that range of 50 cents in the dollar or less. On April 11, HIH¡¯s provisional liquidator Tony McGrath, of KPMG, said that HIH¡¯s financial position was worse by ¡°a very significant margin¡± than was stated in the balance sheet. Since HIH has made no allegations of a criminal nature, it made direct impact on all the policyholders and creditors, as the insurer had no capital to cover its claims. Similarly, ASIC (Australian Securities and Investment Commission) and APRA (Australian Prudential regulation Authority) are also investigating whether HIH directors contravened breached a section of the Corporation Law by giving Pacific Eagle $10 million, and by buying 49 per cent of Ness Security for $17. For example, a new levy on building permits could cover half the cost of a $35 million Victorian Government rescue package for victims of the HIH collapse.
Moreover, it is said that HIH was also involved in the unethical situation. As the group¡¯s share price has been steadily falling, it is well known that HIH did not carry out due diligence. ASIC also suspected that whether the investment in Ness Security was really worth for so much money. Money was not the only part to be worried, the time, energy and stress were also unavoidable problems. The investigation of HIH is still continuing, and it is a long-term battle for all the people who have been involved in. Additionally, some State Government have provided rescue packages for HIH¡¯s policyholders to free from the stranded situation due to the liquidation of the insurer.
Approximate Word count =
1250
Approximate Pages =
5 (250 words per page double spaced)
Simply subscribe to view this paper, and 100,000 others.
| CREDIT CARD |
ONLINE CHECK |
|
|
|
|
|
|
|
|
|
|
JOIN BY PHONE
|
|
|
