Ratings agency Moody’s is still forecasting a bright future for the general insurance industry in Australia, despite the HIH collapse. In a report released last week, Moody’s said the HIH collapse does not signify the tip of an Australian insurance failure iceberg. 

While the New York disaster may temper some of Moody’s upbeat comments, the agency said HIH’s failure resulted from a number of factors, many stemming from internal decisions and strategies. 

It blamed the aggressive overseas expansion undertaken by HIH, increasing leverage commitments and a challenging integration with the acquisition of FAI and optimistic reserving policies. 

The report’s author, senior analyst Simon Harris, said the new General Insurance Reform Act that the reforms in the FSR Act should “significantly enhance the security of the industry as a whole”, through improved financial monitoring, capital adequacy and corporate governance. 

“Larger players will be better positioned than smaller players to cope with the regulatory changes, while benefiting from the flight to quality, ” he said.