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HIH assistance: Commonwealth offer on council claims.



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C041/03

27 May 2003

HIH ASSISTANCE - COMMONWEALTH OFFER ON COUNCIL CLAIMS

More of the Local Government councils affected by the demise of HIH insurance will receive help from the Commonwealth under revised hardship criteria.

Announcing the new criteria, the Minister for Revenue and Assistant Treasurer, Senator Helen Coonan said the Government's decision was based on more detailed information on local government exposure to HIH. It also accounted for feedback from various States.

Under the Government's original offer, assistance was to be provided on a one-to one matching funding basis with the States where a council's exposure to losses arising from the HIH collapse exceeded 10 per cent of its average total revenue over a specified period.

"Under the revised hardship criteria, the Commonwealth will contribute to local government HIH exposures on a 1:1 matching basis with the States where a council's exposure exceeds 15 per cent of average ordinary rates revenue for the relevant financial year and the two preceding financial years. Councils will bear a share of the loss equal to 15 per cent of their average ordinary rates revenue," Senator Coonan said.

"The revised criteria will result in assistance being made available to more councils."

"It overcomes concerns that a significant proportion of total council revenue is tied to specific purposes and is not available to meet HIH exposures. It will also assist in cutting the burden of the HIH collapse at a time when drought has reduced their ability to raise revenue via their rate base," Senator Coonan said.

"The changes are consistent with hardship alleviation. This lays behind the Government's decision to help councils suffering financial difficulty due to the HIH collapse," she said.

Revising the hardship criteria will not affect those aspects of the Government's offer in relation to the exposure of local government mutual insurers to HIH through reinsurance.

"In calculating their exposure to HIH, councils can include calls for additional funds by a mutual insurer where the call is directly attributable to a deficiency by HIH on a reinsurance contract," Senator Coonan said.

Senator Coonan emphasised the shared nature of the provision of assistance with local government claims.

"The Commonwealth offer is tied to one-for-one funding with the States. It is important that local governments work with relevant areas of their State Government to ensure their position is taken into account when the States consider the Commonwealth's revised offer," Senator Coonan said.

© Commonwealth of Australia 2000