As we all now know, APRA failed miserably. If it is true that it felt it could not act against HIH because it might damage the company's business, all it is saying is it was impotent. It is difficult to say with so many distinguished people on the board of directors, but it remains that APRA is a culpable failure and, really, there is no alternative now but to wind it up and take a new approach to financial institution and insurance regulation. The analysis of the reasons for APRA's failure will need a lot more information than is as yet available. One important contributory factor may well be that it was essentially an offshoot of the Reserve Bank of Australia, and the central banking mindset is not appropriate to the insurance market.
Insurance is about risk in a much more fundamental sense than is banking.
The solvency of the banks, first under the RBA and now under APRA, is pretty nearly guaranteed. The exceptions to this are few and marginal. So APRA was established a couple of hundred metres around the corner from the Reserve Bank, in luxurious premises, and seems to have conducted itself pretty much as if it were in the same kind of business. The top officials had little or no training in the insurance markets. They, individually and collectively, have failed and should not be let off lightly.