Prudential regulator APRA has gone on the offensive as it moves to distance itself from the HIH crash.

Its Chairman, Jeff Carmichael, told Channel 9’s Business Sunday program that APRA did all it could – including “leaning on” HIH to sell businesses – to protect its solvency.

In a statement at the weekend, APRA said HIH’s problems developed over several years rather than the past few months. While appointing an inspector earlier than it did might have been better for APRA’s image as a tough regulator, “it would not have reduced the problems facing HIH. Indeed, it would almost have certainly acted against the interests of policyholders.”

As InsNet News  reported last week, the fallout from the HIH crash will take several years to resolve. One leading broker expressed the situation well in a newsletter to clients:

“Security of underwriters will become a major issue for brokers and policyholders alike. The deal that ‘looks too good to be true’ may well be left alone in the future if the underwriter does not measure up.”

In the most recent developments, QBE has reached in-principle agreement with KPMG – HIH’s liquidator – to buy the exclusive rights to offer to renew all HIH’s Australasian travel and corporate insurance policies, as well as its professional indemnity policies in Asia. It will also assume the liabilities for HIH’s travel insurance and many of its policy liabilities in New Zealand, but has chosen not to take on HIH’s corporate insurance liabilities.

QBE has also disbanded its short-lived joint venture with HIH.

And NRMA has paid $10 million less than it expected when it took over HIH’s Australian workers’ compensation business. The lower price reflects the fact that NRMA will not receive a fee from HIH for managing some of its existing claims.

While QBE, Allianz and NRMA have earned praise from a variety of groups for their quick support for Australian policyholders in many classes, the major outstanding problem is in policies and claims for corporate insurance.

Many professional groups have been left with no professional liability cover. The shortfall gaining most media attention at present is the housing industry, with some builders refusing to continue work until the home warranty issue has been clarified.

Members of the legal and accounting industries are understood to still be seeking PI cover. The situation is expected to be unclear for several more weeks, although it is understood that professionals with outstanding fees with HIH are unlikely to get all they are owed, and may have to wait several years for that.

Industry insiders have also been surprised at some premiums charged in the professional PI schemes. Replacement policies are costing professionals who can obtain cover up to five times more than HIH charged. It has led to loud complaints by the affected professions, although industry insiders are less sympathetic. One highly placed source said: “We’ll never see premium as low as some of these again. They should never have been that low.”