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House of Assembly - Fifty-First Parliament, Second Session (51-2)
2008-07-22 Daily Xml
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SAICORP

268 Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (23 October 2007). With respect Budget Paper 4 Volume 1—page 3.38:

(a) what was the policy reason for making the $69.36 million indemnity payment to the SAICORP Fund No 2; and

(b) is this fund part of the SAFA financial statements or is it consolidated into the statements?

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations):

(a) From 1 July 2006, the function of acting as captive insurer of the South Australian Crown has been carried out by the South Australian Government Financing Authority (SAFA) through a separate Insurance Division.

I am advised that the insurance function of SAFA is operated through two funds specifically established in SAFA’s accounts to quarantine the insurance activities from SAFA’s finance activities.

SAICORP Fund No. 1 reflects the normal commercial insurance activities of SAICORP and is funded by premiums collected from agencies. It relates to risks effective from 1 July 1994 that were classified as insurable risks.

Claim payments in respect of incidents that occurred prior to 1 July 1994, claim payments in respect of uninsurable risks and any other payments made under the insurance program that fall outside of the insurance cover provided under SAICORP Fund No. 1 are met from SAICORP Fund No. 2.

As from 1 July 2006, the Treasurer has indemnified SAFA for the financial outcomes of SAICORP Fund No. 2.

On an annual basis, payments will be made under the Treasurer’s indemnity to ensure that SAICORP Fund No. 2 is maintained on a break-even basis in SAFA’s accounts as at 30 June each year.

At the time of amalgamation of SAFA and SAICORP on 1 July 2006, SAICORP Insurance Fund No. 2 had an unfunded liability position of $69.36 million. This figure represented the net of all claims managed through the fund since 1994 less annual cash payments received via appropriations from the Treasurer and interest earnings.

The unfunded liability position of $69.36 million was shown as a receivable from the Treasurer and a decision was subsequently made for the Treasurer to transfer cash to SAFA to extinguish the liability.

(b) SAFA’s financial statements are a consolidation of its Finance and Insurance activities, including the activities of Insurance Fund No. 2.

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