Australian Appeals Tribunal Overturns Disqualification of Former HIH Executive

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December 30, 2009 Wednesday 09:41 AM EST

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Australian Appeals Tribunal Overturns Disqualification of Former HIH Executive

Rebecca Ng

SYDNEY, Australia

Former HIH Insurance Ltd. [86602] executive Justin Herbert Gardener had his disqualification from insurance business set aside by the Administrative Appeals Tribunal of Australia. The Australian Prudential Regulation Authority had disqualified Gardener for his role as an executive of failed insurer HIH.

The tribunal ruled that Gardener is to be treated as if he had never been disqualified from being or acting as the holder of a senior insurance role.

APRA said in a statement that Gardener was a non-executive director of HIH between Dec. 2, 1998, and March 15, 2001.

Gardener was a member of the audit committee of HIH from 1998 until 2001, and served as chairman of the audit committee from Feb. 26, 2001 to March 15, 2001. He was also a member of the human resources committee from 1998 to 2001, said the regulator.

Gardener was disqualified by APRA from being or acting as a director or senior manager of a general insurer on May 3, 2006. According to APRA, Gardener's infractions while with HIH included failure to disclose to the board that HIH's auditor had assessed HIH as a maximum audit risk; compromising the independence and operation of the audit committee; failing to take reasonable steps when an audit report raised doubts about HIH's solvency; and failing to make sufficient inquiries into a questionable business transaction and other business proposals (BestWire, May 22, 2006).

On June 18, 2008, Gardener sought review of APRA's decision with the Administrative Appeals Tribunal. On Dec. 24, 2009, the Tribunal published its reasons for setting aside the disqualification.

HIH, once Australia's largest property/casualty insurer, went into provisional liquidation in March 2001 after turning over much of its retail business to other insurers (BestWire, March 15, 2001). The insurer's slide into insolvency had gained momentum in 2000, amid speculation that an ongoing review by APRA of its financial position signaled problems (BestWire, June 16, 2000).

Australian regulators had named as many as 90 people for investigation and possible charges related to the insurer's collapse, after the publication of a royal commission's findings regarding the causes of the insurer's failure (BestWire, Dec. 17, 2003). The report on the findings of the HIH Royal Commission identified 56 possible breaches of federal law related to HIH's demise, along with a number of regulatory shortcomings that would warrant policy review (BestWire, April 16, 2003).

(By Rebecca Ng, Hong Kong news editor: Rebecca.Ng@ambest.com)

December 31, 2009

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