Federal Treasurer Peter Costello has broken a five-month silence over the recommendations of HIH Royal Commissioner Justice Neville Owen, agreeing to back most of them. For one thing, the Government will review the extent and nature of the cover being provided to Australians by unauthorised foreign insurers (UFIs) – yet another sign that UFIs are causing increasing regulatory and industry discomfort.

Mr Costello gave the UFI review to former Treasury Markets Group Executive Director Gary Potts – submissions can be made through the Treasury website – and went on to say he wants state and territory governments to take heed of the HIH recommendations.

“Justice Owen… makes a number of recommendations that deal with state and territory regulation and taxation of general insurance,” Mr Costello said. (The recommendations actually call for the abolition of all state and territory taxes and levies on premiums.) “I have written to the states and territories encouraging them to carefully consider the recommendations of the report and to take appropriate action.”

Yes, well, don’t hold your breath, and remember it has taken five months for the recommendations to get this far. They’re not exactly core issues for a pre-election government, either.   

Mr Costello sidestepped the recommendation for a policyholders’ protection scheme – which is favoured by the industry – by naming University of Melbourne Professor of Finance Kevin Davis to report to him on the issue. “The Government is not and should not be responsible for the financial promises of these institutions,” the Treasurer said. “Moreover, the precise design of any guarantee, its incentive properties and its associated financial costs warrant close consideration.”