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Appropriation (HIH Assistance) Bill 2001

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2001

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

HOUSE OF REPRESENTATIVES

 

APPROPRIATION (HIH ASSISTANCE) BILL 2001

EXPLANATORY MEMORANDUM

(Circulated by authority of the Minister for Financial Services & Regulation,

the Hon Joe Hockey, MP)

 

 

40703



Table of Contents

 

Outline.................................................................................................................................................. 1

Financial implications........................................................................................................................... 2

Explanation of clauses.......................................................................................................................... 3

 

 

 

 

 

 

 

 

 

 

 



 

1

Outline

1.1   The purpose of the Bill is to provide legislative authority to fund a scheme to pay financial assistance to certain persons with a claim upon a policy of insurance issued by the HIH Insurance Group (HIH) ('the Scheme').

1.2   The moneys appropriated in this Bill are for the designated special purpose and hence are additional to appropriations made in any other Appropriation Act.

1.3   A public company, HIH Claims Support Ltd (HCS), has been established for the purposes of administering the Scheme under a contract with the Commonwealth. HCS is a subsidiary of the Insurance Council of Australia. It is intended that payments under the Scheme will be made from a trust fund to be established by the Commonwealth and of which HCS shall be the Trustee. HCS will:

·           assess applications for assistance to determine whether claimants are eligible for assistance in accordance with criteria determined by the Government;

·           enter into arrangements with the Provisional Liquidator of HIH and other insurance companies in relation to the management and settlement of eligible claims; and

·           on settlement, arrange for payment to claimants under the Scheme.

In return for payment under the Scheme, claimants will be required to assign all rights in connection with the claim; the ultimate effect being that the Commonwealth will 'stand in the shoes' of the claimant as a creditor of HIH.

1.1   On 21 May 2001, the Government announced the criteria for eligibility for financial assistance under the Scheme. Assistance will only be available to persons or businesses in the following categories:

·           Australian citizens;

·           Australian permanent residents;

·           Australian small business proprietors (that is, the business has 50 employees or less);

·           Australian based not-for-profit organisations;

who (subject to paragraph 1.6 below) have a claim under an insurance policy, issued by a HIH company.

1.1   In order to qualify, the event which entitles a person to make a claim must have occurred before 11 June 2001. In the case of 'claims made' insurance, a claim must have been made against the insured, or a circumstance must have been notified to the insurer, before 11 June 2001.

1.2   The following parties are ineligible for assistance under the Scheme:

·           any individual who is not an Australian citizen or permanent resident;

·           any business that is not a small business (as defined for the purposes of the Scheme);

·           any claim which is under a policy of insurance for compulsory third party personal injury (motor vehicle registration) policies, workers’ compensation, builders’ warranty, or compulsory professional indemnity insurance for legal practitioners, on the grounds that these policies are mandatory under a law or regulation of a State or Territory.

·           any individual who, at any time during the three years preceding 15 March 2001:

-        was a director or officer or an associate of a director or officer (as defined in the Corporations Law) of any HIH company; or

-        was in a position, or was an associate of a person who was in a position, to influence or to provide advice to any of the directors or officers of any HIH company, on any matter relating to corporate governance.

1.1   Eligibility will be subject, in some circumstances, to an income test.

1.2   An appeal mechanism will be established to consider disputes in relation to the application of the eligibility criteria and cases involving anomalies in the application of those criteria.

Financial implications

1.3   This Bill gives effect to a Budget Measure announced in the 2001-02 Budget (refer Budget Paper No. 2 page 201). The Bill provides for appropriations to the extent of $640 million from the Consolidated Revenue Fund for the designated special purpose.



 

2

Explanation of clauses

Clause 1 - Short title

2.1   Upon enactment, the Act would be known as the Appropriation (HIH Assistance) Act 2001 .

Clause 2 - Commencement

2.2   Clause 2 provides for the Act to commence on Royal Assent.

Clause 3 - Definitions

2.3   Clause 3 defines certain terms used in the Act, unless the contrary intention appears.

2.4   HIH company means one of the seven companies which were authorised general insurers under the Insurance Act 1973 , and were part of the HIH Insurance Group. These are:

·           CIC Insurance Limited;

·           FAI General Insurance Company Limited;

·           FAI Reinsurances Pty Limited;

·           FAI Traders Insurance Company Pty Limited;

·           HIH Casualty and General Insurance Limited;

·           HIH Underwriting and Insurance (Australia) Pty Limited;

·           World Marine & General Insurances Pty Limited.

2.1   HIH eligible person means a person who is a policyholder, insured or beneficiary under an insurance policy issued by a HIH company and has suffered financial loss as result of the insolvency of the HIH companies. Only HIH eligible persons will be assisted under the Scheme.

Clause 4 - Appropriation

2.2   Clause 4 would provide for an appropriation to the extent of $640 million out of the Consolidated Revenue Fund for the purposes of providing financial assistance to HIH eligible persons, either directly or indirectly, and for meeting administrative costs associated with providing that financial assistance.