APRA Chief Executive Graeme Thompson was surprised by the size of HIH’s estimated $800 million half-year loss, as well as the speed with which it sought provisional liquidation.

He wasn’t alone, but nevertheless the guns were out early yesterday, with critics suggesting the regulator is out of touch with the sector it regulates.

Mr Thompson said on Channel 9’s Business Sunday that APRA suspected the situation was very serious, but had no powers to step in.

A spokesman for Financial Services and Regulation Minister Joe Hockey told the Australian Financial Review that the Minister is “satisfied” with APRA’s handling of the matter. But critics said the legislation controlling APRA should contain “triggers” that would allow the regulator to become involved more quickly than was possible in the HIH case.

Mr Thompson told the Business Sunday program: “The move of the company to apply for a provisional liquidator as quickly as it did was a surprise. The size of the half-year loss was a larger number than APRA expected from its discussions with HIH.”

Some of these issues will be addressed in the present review into APRA’s role. It’s likely that changes to the Insurance Act will allow APRA to take a more interventionist role if an insurer gets into trouble in the future.