The question of whether or not the HIH collapse would have been prevented, or at least would have not been as severe if there had been effective regulatory intervention, has been put to rest with the public release of the Palmer report.

Compiled by former Canadian regulator John Palmer, the report has confirmed that APRA was under-resourced and lacked good staff in the three years leading up to the insurer’s demise.

Former staff of APRA’s predecessor, the Insurance and Superannuation Commission, won’t be surprised by Mr Palmer’s findings. Practically all of the general insurance experts in the ISC were laid off when the change-over was made. As one retrenched ISC employee put it to Sunrise Exchange News: “They threw out the baby with the bathwater when they dismantled the ISC. There was practically no one left who understood general insurance.”

The report identified many problems inside the regulator, including the fact that APRA was reliant on an outdated Insurance Act that over time became “obsolete and behind internationally accepted best practices”.

The report also found that staff assigned to supervisory responsibility for HIH had little knowledge and technical expertise in general insurance. “In the end, the APRA team was overwhelmed by the sheer magnitude of the issues it was encountering at HIH and had neither the manpower nor the expertise to cope with these issues,” the report said.

Speaking as a witness at the HIH Royal Commission last week, APRA CEO Graeme Thompson said that in hindsight he and his staff should have been more sceptical of what they were being told by HIH.

“I think our people were not as sceptical and as questioning as they might have been about warning signals that were evident from the company, and not as forceful in following up requests for information as they should have been.”

He also conceded that APRA did not have the same degree of expertise as its predecessor ISC had. “We didn’t have… people with the same detailed knowledge of individual companies… that had existed in the ISC,” he said.