The HIH collapse in March 2001 was due to poor management and not systemic risk in the insurance industry, IAG CEO Michael Wilkins says.

In a paper for industry think-tank the Geneva Association, he says HIH underpriced insurance risks for a number of years.

He says the factors contributing to the collapse were “a lack of attention to detail, accountability for performance and integrity in the company’s internal processes and systems”.

Mr Wilkins argues the common misconception the HIH collapse and aftershocks reshaped the Australian insurance industry and prudential framework is wrong.

“Significant legislative change to modify the legislative framework was already under way before the HIH collapse,” he says. “However, the collapse accelerated reform and change, escalated its perceived importance and public profile and caused an expansion of the focus on the various aspects of the legal and regulatory framework which were considered to be in need of attention.”

Mr Wilkins says insurance failures are usually caused by random catastrophic events, investment market downturns or long-term risks with matching current premium revenues and future liabilities.

But in the case of HIH it was “internal factors specific to HIH”.

“While the collapse caused short-term capacity issues, it ultimately led to a stronger industry with more disciplined pricing.”