HIH Insurence Group Collapse.docx

1、HIH Insurence Group Collapse Assessment item 1: Web Based ResearchLength: 3000 wordsTaskGo to the following website about the HIH Insurance Company. http:/www.aph.gov.au/library/intguide/econ/hih_insurance.htm (HIH Insurance Group Collapse) and read the article. It is a summary of a very large insur

2、ance company failure in Australia. You may use any other website or source of information which you think might help.Make a history of the main events in the collapse of the company. Can you identify the bad or wrong moves that contributed to the collapse? Can you identify the most important people

3、in the company who might have contributed to the collapse?Using the descriptions of management types discussed in the course, make comment on the ethical behaviours of the principal management persons in the company and explain the basis for your assessment of these persons.RationaleUltimately, stra

4、tegy and strategic thinking can be applied to organisations to take advantage of a company in a manner which would not be considered ethical. Students are required to consider how different decision choices by the directors may have avoided the collapse of the company.Marking criteriaThis item is in

5、tended to make students think outside the square and examine the need to change strategy during a sequence of events.Demonstrated appreciation of the situation25%Strategic issues related to Company issues25%Strategic issues related to the Operations of the company25%Summary of how differently you mi

6、ght have run the company25%Attachment article from Australia government reportsHIH Insurance Group CollapseE-Brief: Online Only issued Date 29 November 2001David Kehl Analysis and PolicyEconomics, Commerce and Industrial Relations GroupBackground There are few surprises when it comes to insurance, b

7、ut 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

8、 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

9、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.Facts About HIH InsuranceHIH comprised several separate governmentlicensed insurance companies, including HIH Casualty and Gener

10、al 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. Il Au1t0alia, this includes compulsory insurance (such as workers compensation an

11、d compulsory third party motor vehicle) and noncompulsory insurance (such as home contents and travel insurance).According to the HIH 2000 Annual Report the company had gross premium revenue of $2.8billion, total assets of $8.0 billion, total liabilities of $7.1 billion, with net assets of $900milli

12、on.A brief recent history of HIH is provided below.DateEventJun 4 1992British insurance broker CE Heath floats off 45 per cent of its underperforming subsidiary CE Heath International Holdings Ltd (HIH) on the stock exchange. HIH in 1991 had net assets of $A39.7 million.April 1995HIH Insurance Ltd a

13、cquires CIC InsuranceJun 6 1996HIH acquires Utilities InsuranceJan 8 1997HIH becomes Australias largest underwriter of bancassurance business after acquiring Colonial Mutual General Insurance.Sep 1998HIH blacklists stockbroking analysts who disputed its assessment of the companyJanuary 1999HIH wins

14、a $300-million takeover bid for FAI Insurance3 March 1999HIH posts a 39 per cent fall in 1998 net profit to $37.6 million, blaming damage claims19 November 1999HIH admits it paid more than it expected for FAI.March 2000HIH returns to profitability in first half of 1999/2000.June 2000Analysts are con

15、cerned about HIH after the Australian Prudential Regulatory Authoritys (APRA) proposes to increase capital adequacy requirements for insurers13 September 2000HIH sells part of its domestic personal lines business to German insurance giant Allianz for nearly $500 million14 September 2000HIH shares tu

16、mble to an all-time low after a lower-than-expected profit result and criticism of the Allianz deal12 October 2000HIH chief executive Ray Williams announces his retirement15 December 2000HIH shareholders call for resignation of former FAI chief Rodney Adler from the HIH board26 February 2001Rodney A

17、dler resigns from HIH board14 March 2001NRMA Insurance buys HIHs workers compensation portfolio.15 March 2001HIH Insurance goes into provisional liquidation with losses of $800 million16 March 2001APRA says HIHs woes stem largely from a reassessment of claims liabilities11 April 2001Provisional liqu

18、idator warns it could take up to 10 years before some creditors are paid.16 May 2001Australian Securities and Investments Commission launches its biggest ever investigation, seizing HIH documents18 May 2001Former HIH chief Ray Williams hands in his passport and says he has nothing to hide21 May 2001

19、The federal government announces a royal commission into what is Australias biggest corporate collapse.Source: AAP, compiled by Rob Lundie.Who Is Affected?Shareholders of HIH are likely to incur significant losses on their investment, perhaps their entire capital. The extent of these losses will be

20、revealed over time.Immediately following the collapse of HIH, numerous reports appeared in the press about HIH policyholders not having their insurance contracts honored and their claims not paid. This section discusses how different policyholders were affected immediately after the collapse.Prior t

21、o and after the collapse of HIH, a substantial number of policyholders with particular types of insurance had their policies taken over and honoured by other insurers. The following sections: Explain which policyholders have had their policies taken over by other companies Identifies those policyhol

22、ders with HIH and its subsidiaries that were at risk of suffering financial loss by not having their insurance contracts honored and claims paid, and Identifies policyholders that may need to take out new insurance cover. Personal and Domestic InsuranceAccording to the provisional liquidator, Allian

23、z Australia Insurance Limited (Allianz) have confirmed that private motor, compulsory third party (CTP), private pleasure craft, home building and home contents insurance policies with HIH, FAI, CIC and WMG, that were current at 1 January 2001 or have been issued by Allianz since this date, are cove

24、red by Allianz. Accordingly, policies in these categories do not need to be replaced. For any other personal and domestic insurance products not listed above, customers should obtain advice as to whether they need to obtain alternative insurance cover.Claims on policies in prior periods of insurance

25、 and in respect of those policies not covered by the Allianz arrangements, will constitute claims against HIH and will not be paid at this time. There is therefore a real risk that personal and domestic policy claims (with the exception of CTP claims) made on policies not current at 1 January 2001 a

26、nd on policies not covered by the Allianz arrangements, may not be capable of being fully satisfied. According to the provisional liquidator, CTP policy claims will be met in full either by Allianz (policies current at, or issued by Allianz since 1 January 2001) or through the relevant state statuto

27、ry schemes regardless of when the policy was issued. Accordingly, current CTP policies do not need to be replaced and normal claims processes remain in place. Workers Compensation InsuranceSchemes exist in each state and territory to make payments to claimants under certain circumstances. In NSW, Vi

28、ctoria and SA, HIH managed workers compensation claims for the relevant state authority, which will continue to settle claims in accordance with their normal practice.According to the provisional liquidator,NRMA Insurance Limited (NRMA) is currently in the process of seeking to take on the renewal r

29、ights in the HIH workers compensation business. The provisional liquidator has agreed with NRMA that subject to completion of the transaction, NRMA will assume HIHs risk in relation to current workers compensation policies from the date on which HIH went into provisional liquidation (ie 15 March 200

30、1). Accordingly, current policies in this category of insurance do not need to be replaced. Nonetheless, workers compensation policies written in Victoria, Western Australia, Tasmania and the ACT have been the subject of governmentfunded rescue packages (see below).Small Business, Rural and Commerci

31、al InsuranceAccording to the provisional liquidator, Allianz have confirmed that small business packages, rural packages and most small commercial insurances (such as commercial motor, fleet motor less than 150 vehicles, property with asset values less than $20 million, public and products liability

32、 policies with turnover less than $5 million and marine) arranged through distributors other than international brokers with HIH, FAI, CIC and WMG that were current at 1 January 2001 or have been issued by Allianz since this date, will be covered by Allianz. Accordingly, most current policies in this category of insurance do not need to be replaced. Small business, rural and commercial insurance policy customers that are not covered under the Allian