Tort reform by Australia?s state and federal governments has created positive change for insurers who write business ?Down Under? according to two Australian lawyers who recently visited Bermuda.

Dean Carrigan and Michael Quinlan, Australian partners in the Insurance and Reinsurance practice group of the Australian law firm Allens Arthur Robinson, visited the island to speak on the subject: ?Post HIH and Beyond, Doing Business in Australia.?

HIH Insurance Ltd, Australia?s second largest general insurer, collapsed in 2001 and resulted in a Federal Government bail-out package for most individuals and small businesses which had been insured by HIH.

A Royal Commission which examined the causes of its collapse said that they were caused by a number of poor business decisions including ill advised acquisitions, poor underwriting and unsustainable low premium pricing.

Mr. Quinlan said: ?HIH had written very many lines of business at comparatively low premiums and at premiums which kept a downward pressure on the premiums which HIH?s competitors were able to charge.

?On the collapse of HIH, premiums on some lines rose to a more sustainable level (often quite significantly) and other lines of cover became completely unavailable.?

In an e-mail interview with this newspaper, Mr. Quinlan said that the Government tort reform that followed is a positive for any insurer writing business or contemplating writing business in Australia.

?The tort reforms which have already been introduced were aimed at reducing the number and quantum of claims and those reforms together with the approach of the Courts (particularly the New South Wales Court of Appeal which is the appeal court in the State with the largest population) to negligence claims and the legislative changes in that State restricting advertising by personal injuries lawyers appear to be resulting in a reduced number of claims.?

Mr. Quinlan said that the courts have been taking a more diligent approach to negligence claims and a significant number of negligence awards at first instance, particularly in relation to personal injury claims, have been overturned on appeal.

There has also been a reduction of claims, particularly in the professional lines.

Underwriting profits are being earned in Australia for the first time in 20 years.

The federal government has also introduced risk-based minimum capital adequacy requirements for Australian authorised general insurers and it will respond soon to a review of the Insurance Contracts Act, the main piece of federal legislation that regulates the relationship between direct insurers and insureds.

It is impossible to say how many Bermuda insurers are actually doing business in Australia, but Mr. Quinlan said: ?Anecdotal evidence suggests that Australians are looking off shore for cover more than they have in the past and that they are looking for cover outside the most traditional source of non-Australian based cover which has previously been London.?

A number of insurers have subsidiaries licensed in both Bermuda and Australia and certainly a number of Australian companies including some insurers have established captives in Bermuda.

Foreign insurers have traditionally been free to write cover into Australia however if they satisfy the test of ?carrying on a business? in Australia they are required to obtain a licence and submit to the prudential and solvency requirements of the Australian prudential regulator, APRA .

The Australian government is currently considering the recommendations of a report which supports the classification of countries with comparable regulatory systems.

Insurers in those countries would be permitted to write cover into Australia, while the ability of other foreign unregistered insurers to write cover into Australia would be removed or curtailed.