A report into the collapse of HIH insurance

Essay by ajf003University, Bachelor'sA+, September 2004

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Table of contents.

1. Introduction. 1

1.1 History. 1

1.2 Stakeholders. 1

1.3 Environment. 2

2. Analysis. 2

2.1 U.K. 3

2.2 U.S.A. 3

2.3 FAI. 4

2.4 HIH accounts. 5

List of references. 7

1. Introduction.

On March 15 March 2001 Australia's second largest insurer, HIH collapsed with debts in excess of A$5billion. This report intends to discuss some of HIH's business objectives and creative accounting practices that may have attributed to the collapse of the company.

1.1 History.

HIH began operating in Australia in 1968 under the name C.E. Heath plc, an English based insurance company whose Australian operations specialised in the underwriting of workers compensation. 1968 was also the year that Ray Williams (future CEO of HIH) and good friend Michael Payne set up MW Payne Liability Agencies, a small insurance company based in Melbourne that offered workers compensation and public liability insurance (Main 2003).

In 1974 the two companies merged and undertook the name C.E. Heath Underwriting and Insurance (Australia) Propriety Limited. The company led by Ray Williams was listed on the ASX as C.E. Heath International in 1992 and in 1995 C.E. Heath plc sold its remaining share of the company to Winterthur Swiss Insurance Co in a deal that also involved the acquisition of local insurer CIC (Main 2003). It was at this time that the company became known as Heath International Holdings or HIH.

HIH was comprised of over 250 companies at the time of liquidation (Main 2003), including HIH Casualty and General Insurance Limited, FAI General Insurance Company Limited (FAI), CIC Insurance Limited (CIC) and World Marine and General Insurances Limited (WMG). They provided many types of insurance in Australia, the USA, and the UK including general insurance underwriting, the operation of insurance underwriting agencies and investment funds management,