Hih Insurance Limited Essay examples

2741 Words Dec 1st, 2014 11 Pages
Case One — Solutions
HIH Insurance Limited:
Inherent Risk Assessment, Legal Liability, Ethics and Audit Reports

The case can be used either progressively through the course using questions relating to chapters as they are taught or as a consolidating case at the end of the course. Where possible, students should be encouraged to concurrently research information in the press relating to HIH while they undertake the case. Clearly, the points for discussion may change as further information becomes available. As the legal proceedings in the case are still in progress, the suggested discussion points are not intended in any way to comment on or compromise any investigation. All information provided in the case is available in the public
…show more content…
There is no formal structure for the maintenance of Prudential Margins although many companies hold a buffer or prudential margin with an 80–90 per cent chance of covering claims (Four Corners report). Many of the transactions in the insurance industry are complex and require high levels of judgment.

• HIH’s position within the industry

HIH was a global insurance company. Price competition was particularly hard on HIH as a substantial portion of their insurance was in workers' compensation. HIH moved into the workers' compensation market in California, which was very competitive and high risk, which led to a financial disaster and losses of $200 m. HIH moved into professional indemnity and public liability insurance. Other high-risk competitive markets entered included Marine and Aviation and natural disasters as well an unbelievable entry in the area of Film Finance. In this area HIH insured films guaranteeing the film in the event of a loss. Some of these films were never even made. One loss prior to the collapse was for $100 m. HIH reportedly had little experience in the film industry and the film industry had a reputation for losing money.

Mr Charles Pratten (Chairman of Rural and General Insurance) held discussions about HIH with the Insurance and Superannuation Commission as early as 1997. APRA is being heavily criticised for failing to take any action. The Australian Institute of Actuaries and Ernst and Young independently published papers…