‘It’s a mystery’
The May 2020 Treasury briefing note said bushfire costs of about $800 million and other blowouts, including adverse workers’ compensation trends of $500 million, had set the fund back $1.4 billion.
But Peter McCarthy, a retired actuary and senior partner at EY who spent 35 years advising governments and regulators on workers’ compensation, said COVID-19 and the bushfires only partly explained the need for the $4 billion. “It’s a mystery what they needed the rest of it for,” he said.
Icare will front State Parliament on Monday and, in response to some pre-hearing questions, it said Treasury had provided $2 billion in funding in June and that it would review its options to put in another $2 billion before the end of the calendar year.
The revelations follow a joint investigation this week by The Age, The Sydney Morning Herald and ABC TV’s Four Corners into the nation’s $60 billion workers’ compensation system that uncovered mismanagement in the NSW government-run icare.
The investigation revealed the key regulator had “grave concerns” about icare amid repeated warnings about its deteriorating financial position and solvency risks relating to another fund, the nominal insurer, the nation’s biggest workers’ compensation scheme, which covers more than 3 million workers in NSW.
One icare director, Mark Lennon, who is also the president of NSW Labor, resigned from the board this week to avoid becoming a distraction from Parliament as pressure mounted for the board and senior executive team to step down.
Icare’s board is chaired by former Macquarie Group executive Michael Carapiet and reports to the NSW Treasurer, Dominic Perrottet. The company’s chief executive, John Nagle, has vigorously denied any solvency issues for the funds icare manages.
Mr Perrottet told Parliament this week “the icare team and the executive icare team do a superb job” and, “The people of icare and the board of icare and the senior management team should be applauded for the work they have done.”
In a statement, Treasury said the TMF is a self-insurance scheme created by the NSW government to insure NSW government agency risk. “Payments are made by the TMF to NSW Treasury if the funding ratio exceeds 115 per cent and grants are received by the TMF from NSW Treasury if the funding ratio falls under 105 per cent,” it said.
“Under this arrangement, there was recently a need to provide additional funding to the TMF. This need arose because of two factors. First, recent reductions in investment balances due to the recent COVID-19-induced downturn in financial markets. And, second, an increase in scheme liabilities due to greater levels of insured costs incurred, such as from the impact of the summer bushfires.”
The joint investigation revealed icare’s financial performance, plunging return-to-work rates for affected workers on the scheme and the rewarding of icare’s executives with big pay packets and bonuses.
The salaries of the top seven executives at the organisation average about $660,000. A confidential NSW Treasury briefing says: “Icare’s executive team is likely the highest paid in the NSW government sector.”
In a statement, icare said the injection of billions of dollars from Treasury into the TMF was for the claims from the NSW bushfires, drought, floods, and historical claims, in addition to anticipated claims, mainly from COVID-19.
Opposition finance spokesman Daniel Mookhey said icare’s “disastrous” management of NSW workers’ compensation has brought the fund protecting vital workers like paramedics, police officers, nurses to the brink of a financial meltdown.
“How can the Treasurer justify a multi-billion, taxpayer-funded bailout but protect the board and pay icare’s executives their bonuses?” he said.
In June 2015, before the TMF was managed by icare, it generated a profit of almost $1 billion, excluding transfers to the NSW Government, and a surplus of $1.5 billion. In 2019 the TMF reported a loss of $383 million.
Mr McCarthy said there had been a major deterioration in the TMF’s return-to-work rate, a key performance measure of workers’ compensation, which means frontline workers aren’t receiving the care they need.
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Adele Ferguson is a Gold Walkley Award winning investigative journalist. She reports and comments on companies, markets and the economy.