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December 20, 2014

Homework Help: BUSINESS LAW

Posted by LEE on Tuesday, September 9, 2008 at 11:13am.

The case of the collapse of HIH insurance also involved in unethical situation that the impact of that failure was not limited to shareholders and unsecured creditors, it also affected employees, policy holders and claimants under polices. HIH comprised several separate government–licensed insurance companies, 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). When HIH collapsed in 2002, it represented the largest corporate collapse in Australian Corporate history. The fundamental problem was that HIH had been offering insurance at too low a price, and had not set aside enough capital to cover its future liabilities. This was exacerbated by management and due diligence failures, which led HIH to acquire other troubled insurance businesses at too high a price. (Elias 2001)

In addition, when HIH took over FAI Insurance, the Owner of FAI responded to allegations that the purchase price of his company was too high .It has emerged that HIH did not conduct due diligence on FAI, and instead relied on FAIs recently completed accounts. The acquisition of FAI was not HIHs only questionable business decision but also partly blamed on its international operations, particularly those in England and the US. The company chose a sector that has proved problematic for many market participants and that, as an emerging insurance sector, involved HIH in business practices and legal risks it did not fully understand. Therefore HIH get their pricing and reserving wrong in sectors that exhibit long tails of risk, such as workers compensation and professional indemnity.

Is it make sense?
plz see it logical flow?

if wrong, could u fix it up?

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