Catholic Church Insurance (CCI) has been fined in NSW for giving insufficient notice of its intention to cease offering workers’ compensation cover, while separately the Federal Court has today approved a scheme for paying future claims in other classes if its financial situation deteriorates.

The NSW workers’ compensation licence required the insurer to provide at least three months formal notice to the State Insurance Regulatory Authority (SIRA) if it intended to cease underwriting new policies. CCI only gave notice on May 3 that it would stop offering the cover from June 29.

SIRA says that after considering the circumstances and ramifications, and submissions by CCI, it decided to impose an $11,000 fine. The Workers’ Compensation Act 1987 provides for a civil penalty of up to $50,000.

“Factors taken into consideration when considering the appropriate penalty include that CCI, as a longstanding licence holder, should have been aware of the requirement to give three months’ notice, and the imposition on policy holders to find alternatives within a limited time,” SIRA said.

SIRA has previously advised that it contacted 419 identified policyholders to provide information on how they could obtain an alternative workers’ compensation policy.

CCI, which acknowledged the breach in June and has paid the fine, entered run-off from late May as a result of high volumes of historic abuse cases, which it refers to as professional services claims.

Based on estimates of claims as of May 31, CCI has assessed it has sufficient assets to meet its liabilities as they fall due, but says the claims situation will continue to develop and is subject to a high degree of complexity and uncertainty.

Policyholders yesterday voted in favour of a scheme of arrangement that would come into effect if the financial position of the organisation deteriorates and it risks becoming insolvent. The scheme also required Federal Court approval, which was delivered today.

The arrangement could see a percentage of claims paid initially, rather than the full amount, while averting reinsurance issues and other costs if would face if it was to become insolvent. The scheme applies to policy areas other than workers’ compensation.

“The board’s purpose in developing the scheme is to ensure that regardless of the financial position of CCI, CCI’s current and future claimants, in respect of Insurance Contracts are treated fairly and that claims are settled as quickly and as fully as possible,” Chairman Joan Fitzpatrick said in a letter to policyholders before the vote.