The Australian Prudential Regulation Authority (APRA) today was granted leave to discontinue its Federal Court action against Rural & General Insurance Ltd (Rural & General - now ACN 000 007 492), which was due to commence hearing on 15 March 2004.

Rural & General was not reauthorised by APRA under the revised Insurance Act 1973 that took effect from July 2002.  The company was prevented from writing any new insurance business from that date and has since been in “run-off”.

Following advice from an APRA Inspector in September 2003, the regulator applied to the Federal Court for an Order to wind-up Rural & General under S461 of the Corporations Act.

In February 2004, the Board of Rural & General appointed voluntary administrators from the accounting firm, Hall Chadwick.  APRA considered that action was not in the best interests of the policyholders and that it would be more appropriate to have a Court-supervised liquidator appointed.

A creditors meeting on 12 March agreed to a Deed of Company arrangement, which Rural & General executed on 15 March.  APRA has taken the view that the Deed has achieved a similar outcome to the Orders and that it is no longer in the public interest to continue with the proceedings.

In handing down his decision today, Justice Roger Gyles declined to make an Order for costs of the proceedings in favour of either party. APRA notes His Honour’s comments that it was appropriate for APRA to have commenced these proceedings and that it was virtually bound to do so.

APRA intends to keep the insurer under close supervision during the period of the Deed to ensure the interests of policyholder claimants and potential claimants are protected as far as possible, utilising the powers available to it under the Insurance Act.

The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry.It oversees banks, credit unions, building societies, general insurance and reinsurance companies, life insurance, friendly societies, and most members of the superannuation industry.APRA is funded largely by the industries that it supervises.It was established on 1 July 1998.APRA currently supervises institutions holding approximately $1.7 trillion in assets for 20 million Australian depositors, policyholders and superannuation fund members.