AN INVESTIGATION OF THE ETHICAL ISSUES THAT ARISE IN THE OPERATION OF A FREE MARKET SYSTEM IN THE HIH COLLAPSE
THE SCOPE OF ETHICS AND THE NATURE OF ETHICAL OBLIGATIONS
There are few surprises when it comes to insurance, but when they do come they nearly always bring bad news. Such was the demise of HIH Insurance Limited (HIH): both a surprise (to many) and very bad news for many policyholders.
On Thursday, 15 March 2001, HIH received approval from the NSW Supreme Court to place HIH into provisional liquidation. Tony McGrath of KPMG was appointed as provisional liquidator to HIH and 17 of its controlled entities. Provisional liquidation is a temporary form of administration that gives HIH time for the provisional liquidators to review HIH operations and assess the financial position.
HIH insurance is now in run?off, which means it is managing its outstanding claims and not writing any new business. This could take several years to complete; some have suggested as long as 10 years.
HIH comprised several separate government?licensed insurance companies, including HIH Casualty and General Insurance Limited, FAI General Insurance Company Limited (FAI), CIC Insurance Limited (CIC) and World Marine and General Insurances Limited (WMG).
HIH wrote many types of insurance in Australia, the USA, and the UK. In Australia, this includes compulsory insurance (such as workers? compensation and compulsory third party motor vehicle) and non?compulsory insurance (such as home contents and travel insurance).
According to the HIH 2000 Annual Report the company had gross premium revenue of $2.8 billion, total assets of $8.0 billion, total liabilities of $7.1 billion, with net assets of $900 million.
Shareholders of HIH are likely to incur significant losses on their investment, perhaps their entire capital. The extent of these losses will be revealed over time.
§ Immediately following the collapse of HIH, numerous reports appeared...