Bills Digest 93 1995-96 Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Bill 1996

Numerical Index | Alphabetical Index

This Digest is prepared for debate. It reflects the legislation as introduced and does not canvass subsequent amendments.

This Digest was available from 29 May 1996


Passage History

Date Introduced: 8 May 1996
House: House of Representatives
Portfolio: Treasury
Commencement: Part 1 (Preliminary formalities of the Bill), Part 2 (Transfer of assets of the Housing Loans Insurance Corporation), Part 3 (Pre-transfer contracts), Part 4 (Transfer and rights of employees) and Part 5 (Miscellaneous) commence on the day the Act receives the Royal Assent.

Part 6 (Abolition of Corporation) commences on a day to be fixed by Proclamation (but not earlier than the 'transfer day', and in any event 6 months after the 'transfer day').


The purpose of the Bill is to provide for the transfer of the assets, and the abolition, of the Housing Loans Insurance Corporation ('HLIC'). A new Government-owned company is to be established. It is, for all practical purposes, identical to a Bill of the same name passed by the House or Representatives on 24 October last year, but which did not make it through the Senate before the Federal election.


HLIC was established by the Commonwealth Government in 1965 to provide a Government-backed housing loan insurance scheme. The main purpose for this scheme was to assist prospective home purchasers to obtain a loan at a reasonable rate of interest. HLIC offered insurance against the risk of loss by a lender to recover against a home loan.

In more recent years, HLIC has extended its activities to insuring loans for the purchase, construction or refinancing of non-residential buildings. Under amendments to the Housing Loans Insurance Act 1965, in 1985 and 1987, HLIC was empowered to insure approved dealers in the secondary mortgage market, and to enter into reinsurance contracts with lenders, respectively.

HLIC is the largest mortgage insurer in Australia and it operates in competition with other insurers. Under the existing legislation, HLIC is guaranteed by the Commonwealth but it is self-financing. HLIC is liable for Commonwealth, State and Territory taxes. HLIC operates on a national basis with offices in each State capital. HLIC operates as a business undertaking.

Initially, the sale of HLIC as a going concern was announced in the 1989 Budget. The Housing Loans Insurance Corporation (Sale of Assets and Abolition) Act 1990 provided authority for the Commonwealth to effect the sale of the HLIC franchise to the private sector.

This Bill will complete the reorganisation of this Government asset

  • by restructuring HLIC into a new Government-owned company ('Company Limited');
  • enabling the new restructured HLIC to be contracted to manage the existing portfolio of HLIC's insurance policies;
  • making available sufficient capital for the restructured HLIC to satisfy the requirements of the Insurance and Superannuation Commission;
  • addressing the issues of the transfer of staff to the new company; and
  • winding-up of the 'old' HLIC body corporate.

Technically, this restructuring of HLIC into a Government-owned company does not necessarily mean that this business enterprise will be sold immediately to the private sector. It does, however, release HLIC's capital and financial reserves to return to Consolidated Revenue. Presumably, after a period of operating as a Government-owned company, which will attract new business (as well as managing the 'old book' policies), the Government would have the option of selling this asset.

The estimated gain from the return to the Commonwealth of HLIC's capital and financial reserves of this public asset is $100m in 1995-96. Expected budget outlays associated with the management of existing (i.e. 'old book ') insurance policies in future years are:

1996-97 1997-98 1998-99

$20m $15m $8m(1)

There is a view that the expected budget allocations, above, are a relatively high estimate and that they reflect an anticipated increase in home loan defaults, at least in the next two financial years. This is, however, against a backdrop of a fairly low rate of loan defaults in 1994.(2)

Main Provisions

Clause 3 contains definitions of words and terms used in the Bill. One significant definition is 'transfer day' which is the day fixed by the Minister by notice published in the Gazette. The 'transfer' refers to the transfer of assets and liabilities from HLIC to the new Company Limited. Regard should also be paid to the special definition of 'assets' in the Bill at clause 3.

Clause 6 specifies that the newly restructured body corporate, which is to be called the Housing Loans Insurance Corporation Limited (the new 'Company Limited'), does not have the shield of the Crown and it does not represent the Crown. The Company Limited is simply a company registered under the Corporations Law and owned by the Commonwealth.

Clause 7 is a key provision in the Bill and it empowers the Minister to determine in writing what assets, capital and money are to be transferred to the new Company Limited to enable it to operate as an insurance company. The Clause also specifies that any existing HLIC insurance contracts remain with the Commonwealth. In essence, the clause contains the necessary authority to transfer assets back to the Commonwealth or to the new Company Limited.

Clauses 8 and 9 operate as saving provisions for legal instruments (e.g. documents and agreements) and any pending legal proceedings, respectively. These saving provisions have the effect of substituting the Commonwealth or the new Company Limited, whichever is applicable, in lieu of the HLIC which is to be abolished.

Clauses 10 to 13 provide authority for all HLIC insurance contracts which exist before the transfer of HLIC assets and liabilities to the new Company Limited to be guaranteed by the Commonwealth (Clause 11) but managed by the new Company Limited. The Bill refers to these items as the 'pre-transfer contracts'. To facilitate this arrangement, a management agreement between the Commonwealth and the new Company Limited will be completed. Clause 12 appropriates any necessary payments from the Consolidated Revenue Fund to an Insurance Account to met any Commonwealth liabilities arising from the pre-transfer contracts.

Comment: It is conceded that the Commonwealth's liabilities under pre-transfer insurance contracts are amounts that only become fixed from time to time as claims arise in the future. Nevertheless, the Explanatory Memorandum to the Bill provides an estimated of expected outlays (see table above). It is suggested that consideration could be given to providing a statutory cap (albeit with a reasonable margin) for this appropriation.

Clauses 14 to 15 provide for the transfer of HLIC employees to the new Company Limited on the same terms and conditions of employment. Subclause 14(3) specifies that the act of transfer does not create an entitlement to, say, a redundancy payment. HLIC is audited by the Australian National Audit Office ('ANAO').(3) Subclause 14(4) relieves ANAO of audit responsibility for the new Company Limited.

Clauses 16 to 22 provide portability for long service leave credits for HLIC employees who transfer to the new Company Limited.

Likewise, Clauses 23 to 25 provide transitional and saving provisions for workers' compensation matters, while Clauses 26 to 28 deal with maternity leave entitlements.

Clauses 29 and 30 have the effect of continuing, when applicable, the provisions of the Crimes (Superannuation Benefits) Act 1989 and the Director of Public Prosecutions Act 1983, respectively, to HLIC employees in relation to any matters which may have arisen while they were employed with HLIC, and who are now employed by the new Company Limited. Likewise, any person employed by the new Company Limited from the transfer day is subject to those Acts, as if the new Company Limited was a Commonwealth authority.

Clause 31 removes any obligation upon the Commonwealth to accord public service mobility rights, after transfer day, to any employee of HLIC who has those rights at present. Mobility rights would otherwise have allowed employees who, after transfer day, relinquish employment with the new Company Limited to seek reappointment to the Public Service.

Clause 32 proves an exemption from Commonwealth, State and Territory taxes in relation to the transfer of HLIC's assets and liabilities pursuant to Clause 7.

Clause 33 provides a mechanism for the registration of title to assets divided between the Commonwealth and the new Company Limited, as a result of the transfer of assets and liabilities from HLIC.

Clause 34 provides that any transfer of assets of HLIC which would result in the 'acquisition' of the property of any person otherwise than on just terms, then the Commonwealth must pay that person reasonable compensation.

Clause 35 stipulates that the financial statements of the new Company Limited required to be sent to the Commonwealth as a shareholder of the company must also be tabled by the Minister in Parliament.

Clause 36 continues the obligations arising from the Commonwealth Borrowing Levy Act 1987, which applied to HLIC, to the new Company Limited.

Clause 39 repeals the Housing Loans Insurance Act 1965 and the Housing Loans Insurance Corporation (Sale of Assets and Abolition) Act 1990, and in doing so abolishes the HLIC.

Comment: In Clause 39, the reference to 'Housing Loans Insurance Act' without a year is not a drafting oversight. The Act is defined in that form inthe definitions (see Clause 3).


1. Explanatory Memorandum to the Housing Loans Insurance Corporation (Transfer of Assets and Abolition) Bill 1995: 3.

2. See Rogers, Ian 'HLIC claims mark a big rise in defaults', Australian Financial Review, 6 October 1995. See also, Rogers, Ian. 'Third time lucky in $100m HLIC funding restructure', Australian Financial Review, 6 October 1995.

3. See for example, 29th Annual Report & Financial Statements: Year Ended 30 June 1993, Housing Loans Insurance Corporation, December 1993.

Contact Officer and Copyright Details

Brendan Bailey, Ph. 06 277 2434
Bronwyn Young, Ph 06 277 2699
23 May 1996
Bills Digest Service
Parliamentary Research Service

This Digest does not have any official legal status. Other sources should be consulted to determine whether the Bill has been enacted and, if so, whether the subsequent Act reflects further amendments.

PRS staff are available to discuss the paper's contents with Senators and Members and their staff but not with members of the public.

ISSN 1323-9032
© Commonwealth of Australia 1996

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Published by the Department of the Parliamentary Library, 1996.

This page was prepared by the Parliamentary Library, Commonwealth of Australia
Last updated: 23 May 1996

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