Catholic Church Insurance (CCI), which was Australia’s oldest continuously operating general insurer until it entered run-off, recorded a net loss of $274.2 million last financial year while capital reserves deteriorated, the annual report shows.

The loss compares with a profit of $866,000 the previous year, which followed losses that reached more than $200 million in fiscal 2020. The annual report has been lodged with the Australian Charities and Not-For-Profits Commission.

Last May 29, CCI said it would stop issuing renewals or new policies because of financial pressures resulting from an increase in historical abuse claims, referred to as professional standards claims. The Federal Court and policyholders later approved a scheme of arrangement for the “orderly” payment of claims should the insurer risk becoming insolvent.

The annual report shows the prescribed capital ratio, which reflects the amount of capital held relative to the minimum required by the Australian Prudential Regulation Authority, deteriorated to 0.14 at the end of the year to June 30, from 1.61 in the previous period.

The company has targeted a prescribed capital ratio operating range of at least 2.4 times.

“Despite working diligently to decrease the balance sheet stress, CCI’s [ratio] continued to decline 
and, with the understanding that ongoing further deterioration of our financial position was likely, 
led to the CCI board’s decision to place the organisation into run-off,” Chairman Joan Fitzpatrick and CEO Roberto Scenna said in the report. “As we face forward now into our new operating structure in 2024, our purpose and mission remain – to serve by managing claims and the run-off operation to the best of our ability and in the best interests of all policyholders.”  

Premium revenue last year grew 7.7% to $357.3 million, while gross claims incurred increased to $682 million from $459.1 million. The underwriting result deteriorated to a loss of $278.5 million.

The statement of financial position shows an outstanding gross claims liability of $1.25 billion. The total includes a current claims liability of $598.65 million and a non-current liability of $654 million.

The report says there is significant uncertainty around future professional standards claims, given publicity surrounding the Royal Commission into Institutional Responses to Child Sexual Abuse and the National Redress Scheme.

The redress scheme was established in 2018 with the aim of minimal legal involvement, and is expected to be open for 10 years, the report says. 

“While CCI experienced an increase in the number of claims reported since 2013, this has been exacerbated with the introduction of the National Redress Scheme,” the company said. “Claimants may be pursuing matters first through litigated means, leaving the National Redress Scheme as the fallback option.”  

The report is available here.