Some major brokers may defy the HIH provisional liquidator and hand premiums held in their accounts back to their clients after receiving legal advice last week. The large brokers are reportedly confident they can return the money to their clients – if there’s evidence HIH was insolvent when the cover was contracted.

It might be a good idea, but our usually talkative lawyer contacts have fallen silent. Brokers around Australia are estimated to be holding up to $50 million in HIH-bound premiums, but regulators, trade associations and legal commentators haven’t been able to advise the brokers what they should do. It’s left many brokers in suspense, so this latest move is welcome.

ASIC Chairman David Knott has warned brokers they could be in breach of Section 37 of the Insurance (Agents & Brokers) Act, but like everyone else advised them to obtain their own legal advice. For many brokers, that’s been difficult. If a leading broker is prepared to talk publicly about the advice it has received – as Aon Deputy Chairman David Farrell did in yesterday’s Australian Financial Review – it may provide a lead to others… or their lawyers. Mr Farrell said the legal advice his company received “made it more comfortable” about not handing the money over to the provisional liquidator.

Commentators said the legal standpoint may hinge on how quickly the provisional liquidator acts, and if he can prove HIH was solvent when the deals were done. The stand-off may prompt ASIC to provide a lead, possibly by doing nothing at all.