The decision to place HIH into liquidation was taken by the company’s board last Thursday after consultants KPMG indicated the six-month loss to December 31 was about $800 million.

The directors decided that losses from the company’s discontinued British and US businesses, as well as other international business written from Australia, could no longer be sustained by the Australian operations.

The company will manage its existing liabilities in claims, but will not write new business, KPMG Partner Tony McGrath said. “The balance sheet now will facilitate an orderly run-off, but is not capable of supporting ongoing insurance business.

“KPMG will be working with HIH management to continue the process of retaining as much value as possible in the company for the benefit of policyholders, creditors and shareholders.”

Chief Executive Randolph Wein said the decision was difficult, but prudent and necessary. “What has come to light through the business restructuring process are further contingent liabilities that an already weakened balance sheet could not sustain.”

While the recent sales of its Australian and New Zealand businesses must have been a bitter blow for the company, Mr Wein was able to see some upside, saying the sales “have captured substantial value for shareholders”.