1 May 2001

Press Conference, Sydney



REPORTER: Overall, we have had a major general insurance company collapse. Is this a failure of the regulatory system?

MINISTER: I made it very clear today that the Government is going to resist any further attempts by the insurance industry to delay long overdue reforms to insurance. We are going to proceed with haste in relation to the regulatory changes and even though that will cause a significant restructuring to the insurance industry in Australia they are long overdue.

REPORTER: Was it a failure?

MINISTER: Well, it is not for me to give a running commentary on HIH or any other insurance company. The markets will do that, various analysts will do that. I think the key responsibility of the Government is to ensure there is effective regulation and we've got to deliver these new insurance reforms as quickly as possible.

REPORTER: You seem to have resisted any calls for a bailout. Are you working on specific lines of insurance?

MINISTER: Well, as I indicated today, the Government is looking at various options. The key part is that we need firstly to quantify the size of the problem at HIH. Now, the provisional liquidator has a very large team now in at HIH and he is still unable to quantify the size of the problem. We are very concerned for individuals who are suffering hardship. We are using whatever mechanisms are available at the moment to help support those people who have suffered hardship.

It is important to note that of the 1 million policyholders of HIH, the overwhelming majority - and I am talking about 90 per cent or 95 per cent – of those policyholders have protection because of the new arrangements put in place with Allianz, QBE and NRMA. We view the demise of HIH very, very seriously. Today is the first step in what is going to be a long process of dealing with the collapse of Australia's second-biggest general insurer.

REPORTER: Once you get a clearer picture of just how big this is … I mean, you don't seem to be ruling out at this stage any sort of financial bailout. Is that right?

MINISTER: Look, I think it would be irresponsible to play the game of ruling things in and ruling things out. I think what we need to do, is understand where legal liability lies. It would be a careless Government that simply reacted to commentary or sideline opinion and stepped in and allowed some people with a legal liability to get away with their obligations not being held to account. So, we are treading very cautiously, not because we don't care. We do care. It is because we don't want to put at risk current arrangements being put in place to protect policyholders.

REPORTER: It still doesn't seem help those people who are looking at their shell of a house up on the central coast while living in a caravan or half their family is and the other half is living with Grandma in town.

MINISTER: We are looking at options and we are not ruling anything in or anything out. But we need to be very careful in stepping into an area that is both unquantifiable and uncertain as to where the legal liability lies.

REPORTER: But legal liability can take years to determine?

MINISTER: Well, we are waiting on the advice of the provisional liquidator. I have been speaking irregularly with the provisional liquidator. APRA is very involved, ASIC is very involved. We have an enormous amount of government resources working behind the scenes to better understand what happened at HIH. Their work is unfinished and in the interim, we are closely monitoring those who are most disadvantaged by the collapse of HIH and we will be looking to address those issues in the not-too-distant future.

REPORTER: Have you given ASIC a time limit on those directions to widen their pursuit of directors and auditors?

MINISTER: It is not for me to try and restrain ASIC in any way by putting limits or in fact, placing a timetable on their investigations. What I have made clear to both ASIC and APRA is that whatever resources they need should be made available to address any issues relating to the collapse of HIH.

REPORTER: So, just going back to the people, is the message for them just to sit tight?

MINISTER: The first thing that individual policyholders should do is to get advice from either their broker, their agent or their lawyer. It is very important to get professional advice. As I pointed out today, every single policy of the 2 million policies at HIH were different. And there are different circumstances in which that policy was written, there are different liabilities, there are different risk assessments. Therefore, gross generalisations from the pulpit in Canberra are not going to help those people who have particular difficulties with HIH.

The good part of all this is that many of the individual HIH problems were addressed prior to the provisional liquidator being appointed in March. That shouldn't be lost. If a provisional liquidator had been appointed before any of the deals with Allianz, NRMA or QBE had been signed up there wouldn't be a few thousand people out there very upset, there would be up to a million people out there very upset. So we have to deal with this in a very measured and responsible manner.

REPORTER: Just in relation to the NRMA, should you not have come in earlier in regard to that board dispute that was going on. That had been going on for months, and just before it had ended you spoke with APRA and ASIC. Was that too late?

MINISTER: It is not for that Government to micro manage …

REPORTER: But you did ….

MINISTER: Well, just hear me out. It is not for the Government to micro manage boardroom activity in individual companies. I have expressed my displeasure to the acting chairman of NRMA in no uncertain terms about the extension of board instability to the management of NRMA. The timing could not have been poorer. NRMA has to sort itself out particularly in light of the collapse of HIH. They need to do it quickly and responsibly. Now, the shareholders are trying to take an appropriate lead. I commend them for their actions, but at the end of the day the only power the Government has in relation to this is to ask our regulators to closely monitor what is happening at the NRMA, and do whatever they can to ensure the NRMA continues to be a strong and successful general insurer in Australia.

Thank you.