Tony McGrath, the KPMG accountant who’s in charge of liquidating failed Australian insurer HIH, has filed a claim against the Australian government alleging that negligent supervision on the part of its insurance regulatory agencies substantially contributed to the collapse of HIH.
He’s seeking at least a partial recovery of the approximately A$5.3 billion ($2.97 billion) in debts that HIH is estimated to have, plus A$310 million ($174 million) in costs involved in HIH’S takeover of FAI Insurance Ltd. in 1998.
McGrath’s accusations are focused on the failure of the Insurance and Superannuation Commission (ISC) and its successor the Australian Prudential Regulatory Authority (APRA) to properly investigate FAI’s solvency and the terms of the takeover. He’s indicated that the purchase of FAI, which apparently had a large number of undisclosed losses, contributed substantially to the collapse of HIH in March of 2001.
The affair is politically charged as well. A rarely employed Royal Commission is currently investigating the company and its officers and directors for possible criminal acts. McGrath’s final report on HIH’s debts and plans for its liquidation will coincide with the release of the Commission’s report, which is expected early in 2003.
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