Bizarre and unprecedented. That’s how ICA Executive Director Alan Mason describes the NSW Government’s $69 million impost on the insurance industry to cover its HIH liabilities.

Mr Mason said the levy – which the legislation specifically forbids the industry from passing on to consumers – is based on “a flawed assumption that the industry made a $1.8 billion profit” last year. This was, in fact, an underwriting loss.

“Such a tax on the shareholders of existing insurance companies to bail out a failed competitor seems extraordinary by any measure,” Mr Mason said.

Describing the levy as a tax on every policy in NSW, Mr Mason said the measure could reduce solvency and potentially impair the industry’s security.

Indicating there could be risks for brokers and agents in the legislation, Mr Mason said the “no passing-on” measure is intended to embrace all providers of insurance. “All it will do is damage the reputation of Australia and New South Wales,” he said. “It’s bad policy.”

Despite intense negotiations with NSW Treasurer Michael Egan and offering three alternative ways to cover the Government’s HIH-linked liabilities, Mr Mason said ICA efforts have been unsuccessful.