As the dimensions of the HIH collapse become clearer – and lawyers begin to recruit disgruntled stakeholders for a class action against the company and its directors – the role of APRA remains under scrutiny. Canberra insiders have suggested the regulator has little knowledge of the general insurance industry and its culture. It’s understood that no general insurance specialists were retained from APRA’s predecessor, the Insurance and Superannuation Commission.

“They wanted a new culture that married private enterprise and government,” one source said. “They wanted to put more responsibility on auditors, actuaries and directors, and they didn’t think that would require them to have a deep knowledge of the way the general insurance industry works.”

While APRA continues on its very steep learning curve, the Australian media focused last week on the normally media-shy Ray Williams, HIH’s founder and MD until December 15. Mr Williams broke cover to express his shock at the company being placed into provisional liquidation.

In interviews with national newspapers, Mr Williams said that when he left HIH “there were no indications at all that we would not be able to continue to underwrite”. He told the Financial Review: “I think you’ve got to look therefore at what’s happened subsequent to that.”

While the provisional liquidator, KPMG Partner Tony McGrath, continues to delve into the company’s financial state and consult with major industry groups like ICA and NIBA, policyholders left high and dry by the company’s collapse are beginning to make themselves heard. That’s hardly surprising, when you consider that prominent among them are NSW lawyers whose LawCover scheme was underwritten by HIH.

Many professional groups have been left with threatening gaps in their PI exposure, as have a range of liability schemes. Brokers have also been affected. There are hundreds – perhaps thousands – of cases of individuals and businesses facing financial difficulties as a result of the HIH collapse, and law firms are now writing to HIH shareholders inviting them to join a class action.

As one leading insurance consultant commented yesterday: “We’re only starting to realise the impact this collapse is having on the wider business community.”

Brokers dealing with hard-to-place business are now expressing frustration at the refusal by major underwriters to take on some HIH risks, at any price. The collapse came at the same time as the market hardened, with the result that new policies were always going to cost more. Those liability policies finding a new home are costing an average 30% more than HIH charged, with much higher quotes for marginal performers. 

As one broker noted: “There’s a lesson in the fact that HIH charged so much less than anyone else is prepared to consider.”