Catholic Church's insurance company in financial trouble over abuse payouts
By Chris Vedelago
Sydney Morning Herald
December 22, 2020
|St Patrick's Cathedral, home of the Catholic Archdiocese of Melbourne.|
Photo by Pat Scala
The Catholic Church’s private insurer spent more than $58 million paying out the victims of sexual abuse last year and the company is being forced to raise fresh capital and liquidate investments to cover a future compensation bill worth at least another $238 million.
Catholic Church Insurance (CCI) has posted nearly a $250 million loss as it struggles to meet a wave of new claims in the wake of the Royal Commission into Institutional Responses to Child Sexual Abuse.
CCI, which insures Catholic parishes, religious institutions, welfare groups, aged care facilities and schools across Australia for incidents of property damage, loss and injury, has also covered compensation and legal costs for sexual abuse committed in many church organisations since 1969.
The insurer's sexual abuse payouts – known as "professional standards" liabilities – topped $58 million in the financial year 2019-20, according to figures obtained by The Age and The Sydney Morning Herald.
CCI has declined to provide data from earlier years.
However, the group’s annual report shows the number of professional standards claims it received in 2019-20 drove a 74 per cent rise in total insurance claims.
The ballooning current and anticipated costs mean CCI is moving to liquidate investments, to raise capital to meet what it now expects to be at least $238 million in future sexual abuse payouts.
It also stopped paying dividends and distributions to the Catholic organisations that are shareholders in the non-profit, cutting off an important source of income for some of these entities.
Among its shareholders are the Australian Episcopal Conference of the Roman Catholic Church, archdioceses of Melbourne, Sydney and Brisbane, and the Jesuits, Marists, De La Salle Brothers and Sisters of Mercy.
"Although it is not certain that these efforts will be successful, CCI has determined that the actions that it is taking are sufficient to mitigate the uncertainty and has therefore deemed it appropriate to continue to prepare the financial report on a going concern basis due to its ability to realise its assets and settle its liabilities in the ordinary course of business at the amounts recorded in the financial statements," CCI’s annual financial report said.
Chief executive Roberto Scenna said the capital management plan "is doing what it was designed to do".
"CCI is now seeking to restore the capital levels to a level that it believes reflects the future risks to CCI," he said.
"The other actions in our capital raising initiative are still in progress and given the nature of the activity and conversations, it is not appropriate for us to make further comment on these initiatives."
Mr Scenna said the nature of the reporting of sexual abuse claims – some of which are decades old – made it difficult to assess CCI’s future liability, which could "ultimately be higher or lower than actual experience as it develops over time".
The Australian church and local religious orders, as well as schools and outreach organisations, have been inundated with compensation claims and lawsuits since the start of the royal commission in 2013 and the establishment of the National Redress Scheme, which is due to run until 2027.
"The introduction of the National Redress Scheme approximately two years ago has resulted in a significant increase in the number of reported claims and significant uncertainty in establishing the potential exposure in order to predict the exposure to abuse related claims," CCI’s annual report said.
In 2015 CCI had estimated it would cost $150 million to settle all outstanding and anticipated sexual abuse claims, but its financial liabilities have continued to grow.
The church and its long-time insurer have also been exposed to a raft of new claims and lawsuits following legal changes and court decisions allowing sexual abuse victims to set aside settlement agreements made decades ago as unjust and to seek new compensation.
Since 2019 the church has also paid a series of landmark settlements worth more than $1 million, compounding the financial pressure.
The conduct of the church and CCI in billing legal costs for processing sexual abuse claims has also recently come under fire from a judicial figure in the Supreme Court of Victoria.
In a lawsuit over abuse suffered at the hands of notorious paedophile Gerald Ridsdale, CCI and the church sought to bill the alleged victim more than $65,000 in costs to respond to a series of subpoenas. They had originally sought up to $151,000.
Judicial registrar Julie Clayton said while CCI and the church were entitled to reasonable costs, she did not consider it reasonable for an argument for costs to be made by three solicitors and two barristers.
"It seems perverse that an organisation [the church] which is prepared to comply with a subpoena, provided its costs are met, will spend more than six times that amount in objecting to the subpoena," Ms Clayton wrote in a decision in September.
The Age and the Herald have previously revealed that only 28 per cent of the $34.27 million the church spent on compensation under the Melbourne Response scheme from 1996 to 2014 went to victims, with the rest spent on legal fees and administrative expenses.