The Victorian Managed Insurance Authority (VMIA) has posted a loss of $319.9 million in the year to June 30, following three years of natural disasters, falling interest rates and increased risk exposure.

The result comes after it budgeted for a $6.7 million surplus and follows a $41,151 loss in the previous year. It is the fourth and largest loss for the insurer in five years.

New VMIA CEO Warren Hutcheon says “flood losses, low global investment returns and the one-off consolidation of Department of Health liabilities” have driven the result.

He says a large proportion of flood losses were to public assets such as roads, rail and hospitals, which VMIA insures.

“VMIA has performed well in the aspects of our insurance operations under our direct control, achieving a surplus from those results of $36.5 million, compared with a budget of $9.8 million.”

Mr Hutcheon says the organisation has been hit twice by lower interest rates; first by falling fixed-interest investment returns and then by the resulting rise in valuation of its long-tailed claims exposure.

Net claims in the year totalled $489.15 million, up from $288.34 million, with the rise driven by prolonged periods of flooding since 2010 and the continued run-off of 2009 bushfire claims.

Another factor in the claims jump is the $100.4 million of liabilities VMIA took over from the state’s Department of Health – mainly medical indemnity claims against doctors and others before 2003.

Net investment income for the year was $62.9 million, representing a return of 4.27%. VMIA’s long-term target is 7.5%.

Shadow finance minister Robin Scott says the Government’s “dumping of $100 million of medical insurance risk from the health department to the VMIA” has affected the result.

“This financial sleight of hand has placed the agency in a precarious position,” he told insuranceNEWS.com.au. 

VMIA has about $128 billion of state insured assets in its portfolio. It handles the insurance needs of all state government departments and agencies, 1100 health organisations and 2700 community groups. It also handles current and former builders’ insurance schemes and provides risk management advice to the state.