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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2009-03-04 Daily Xml
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MOTOR ACCIDENT COMMISSION

Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (14:33): My question is again to the Treasurer. What are the Motor Accident Commission's losses so far in 2008-09? What is its present solvency level? What action has he taken to address concerns raised by the Auditor-General about the commission's solvency?

In response to concerns raised by the Auditor-General in his return to parliament, the Treasurer confirmed to the house on 15 October 2008 that the Motor Accident Commission had breached its statutory solvency limits, with a solvency level of 98.4 per cent. The commission's assets at the time were inadequate to meet accident claims. The 2007-08 Funds SA incorporated the Motor Accident Commission's funds of $1.7 billion under management.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:34): I preface my answer by saying that the Motor Accident Commission is as exposed to the violent swings in the equity markets and the property trust market as Funds SA. In fact, under our new Funds SA legislation, we are moving to a central funds management organisation. It had been Funds SA. The various government entities such as the Motor Accident Commission will simply purchase their units from the central funds management body, so it is exactly as I outlined in answer to an earlier question.

In terms of the solvency issue, from memory, when we came to office the Motor Accident Commission was less than 100 per cent fully funded. What we did on coming into government was spend quite some time making some significant decisions in restructuring the way the Motor Accident Commission operated, and we brought in some new legislation that in fact increased the prudential margin we wanted in assessing the funding of the entity. In fact, we put in a similar prudential margin as applies to private sector insurance companies.

What that saw was that, prior to the current financial crisis starting to take hold at the back end of last year, around September and October, we had funding of the order of 160 per cent solvency. When I came to office it was about the 80 per cent mark. We had built up the asset to 160 per cent solvency, and I think the last number I saw only a matter of a few weeks ago—and I will come back to the house with the appropriate figures—was about the 100 per cent mark. It might be a little under; it might be just under, but I will get that verified.

Compared to other entities, the solvency is very good. Yes, it has breached its statutory requirement, because I put in place a significant statutory hurdle, which is the hurdle that private sector insurance companies have to reach. I have to say, having heard overnight that the American government has pumped another $30 billion to $40 billion into the world's largest insurance company, the AIG group, which is clearly totally insolvent and has no assets to cover any liabilities, our Motor Accident Commission at about 100 per cent is doing pretty well. That just goes to show why in the case of this entity the government was able to grow its asset base to 160 per cent over liabilities to prepare for a rainy day. That rainy day has turned into a hurricane, yet it remains incredibly robust.

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