Valuation of Liabilities for Historical Abuse Claims

In the wake of growing legal, social, and financial scrutiny, institutions with historical responsibilities for the care and welfare of children are required to confront the financial and ethical implications of child sexual abuse (CSA) claims. With evolving legal precedents, increasing claim volumes, and shifting insurance landscapes, the need for accurate, actuarially sound valuations has never been more urgent.

This article explores why understanding and managing these liabilities is not just a matter of compliance—but a critical step toward accountability, transparency, and long-term sustainability.

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Who should hold a provision for historical abuse claims?

Generally, institutions which could be held responsible for the liability to compensate victims of child sexual abuse (CSA) or physical abuse. These institutions should consider whether this represents a provision which should be recognised in their balance sheet, including through the application of vicarious liability. These entities could include:

• Churches, synagogues, mosques, temples and missions
• Not for profit entities with historical involvement in child welfare
• Hospitals and other welfare services
• Foster care providers, children’s homes and orphanages
• Schools, clubs, youth centres and training facilities
• Insurers, who provide liability cover for institutions such as those listed above

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Why should institutions have an actuarial valuation of CSA claims?

An actuarial valuation of CSA claims may help an organisation better understand the potential value of their liabilities, including from claims yet to be reported, and assist them in meeting their obligations under accounting standard AASB137. These types of claims can be reported decades after the event to which they relate, with no statute of limitations, making it difficult to estimate the total number of claims expected.

Due to the broader data sets to which actuaries often have access, they are also able to reference benchmarks on both claims numbers and sizes, and understand and communicate wider trends and uncertainties to entities with only a small amount of their own claims information.

Another key element can be the estimation of recoveries from other parties as it is not uncommon for the responsibility for some matters to be attributed to more than one entity. These can include other charities, churches and insurers. As such, organisations should seek to understand the bases for partial settlements in their historical claims as well as any agreements in place during their at-risk time period.

CSA claims (other than for insurers) typically meet the AASB 137 definition of a provision, being a liability of uncertain timing or amount. Organisations need to determine provisions under AASB 137 ‘Provisions, Contingent Liabilities and Contingent Assets.

When setting up a provision there is often an associated contingent asset, however, it is much harder to meet the accounting requirements for recognition of a contingent asset, which may only be disclosed if an inflow of economic benefits is probable. When this becomes virtually certain then the asset may be recognised in the financial statements.

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How can institutions manage their CSA claims?

Both the Victorian¹ and New South Wales² governments have guiding principles for their agencies regarding CSA civil claims, although the Victorian principles are non-binding. While these principles are intended to apply to government agencies, they may provide guidance to other organisations on how to manage their claims.

The following are some of the key principles across the two sets of government guidelines:

• Ensure the process is not unnecessarily adversarial for claimants.

• Early acknowledgment of claims and regular communication with claimants about the progress of their claims.

• Consider paying legitimate claims without litigation. This has the benefits of being potentially less traumatic for the claimants and reducing legal costs for the organisation involved.

• Offer a written or in person apology where the organisation has acted improperly.

• Seek to recover parts of the settlement from the alleged abusers where practical and where a perpetrator is clearly culpable.

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Challenges IN valuing CSA claims liabilities

Estimation can be highly uncertain due to:

• The continuously evolving legal environment for these claim types. In the last two years there have been many legal matters settling for millions of dollars, which have the potential to set precedents in other civil cases.

• A November 2023 High Court judgement³ served to set aside a permanent stays, limiting the future use of this defence against reopening claims. Other cases have also indicated the possibility of claims extending to include payments to family members of the victims.
• Claims farming activity has increased in recent years, including the cold contacting of, and potential financial exploitation of survivors. In response, NSW passed the Claim Farming Practices Prohibition Bill 2025 on 27 March which criminalises unsolicited contact of potential claimants and prohibits the buying and selling of claim referrals. As of the date of writing, the Bill has passed Parliament and is awaiting assent. This will bring NSW into line with Queensland where a similar Act was passed in 2022, and South Australia which has a similar Bill introduced in 2024.
• Estimating the time period when the abuse occurred can be difficult as the events are often not reported until many years after they are alleged to have occurred.
• There is limited evidence on which to base an estimate of the timing and effectiveness of changes to CSA risk management. Narrowing down the dates when Child Safe standards came into effect at an organisation-level and ‘more detailed’ child protection laws may provide a starting point, but the effectiveness of such risk management changes is ultimately determined by the change in CSA incidents – not all of which are reported.
• Compared with other valuations, CSA claims data may be very sparse when looking at an individual organisation. Benchmarking against similar valuations where possible and looking at the national redress scheme can provide much greater insight and certainty.

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Insurance market for CSA

• Following the 2015 Royal Commission⁴, there was an increase in CSA claims and as a result some private insurers refused to cover Anglican Schools in QLD for CSA. Out of home care and youth homelessness services also faced challenges in obtaining cover as these risks were no longer within insurers’ appetites. CCI became the main insurance provider for CSA claims. A further gap was left in the market after the company voluntarily entered run-off on 30th May 2023 after its members withdrew their financial support. From CCI’s 2023 Annual report, CSA claims played a significant part in the decision to enter voluntary run-off. “…We have conveyed the ongoing financial pressure CCI has faced, particularly with regard to increasing liabilities caused by high volumes of Professional Standards Claims. Despite several previous successful capital remediation initiatives, by early 2023, the financial pressures had not abated…”⁵ This has the potential to result in upwards pricing pressure in a lower capacity market, as well as scaling down of services for childcare and placements of children in out of home care from some providers.
• CCI put in place a scheme of arrangement which became effective on 2nd November 2023. Whilst there is evidence that the level of certainty around insurance recoveries from CCI has increased in recent years, there remains an expectation of a reduced proportion of claims recovered for matters prior to 2023. The difficulty in estimating insurance recoveries from CCI is compounded by the reduction in publicly available information about the insurer through APRA data returns and publication.

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The National Redress Scheme (NRS)

• The NRS began accepting applications on 1 July 2018, in response to the 2015 Royal Commission and is set to stop receiving applications on 30 June 2027, followed by closure of the scheme on 30 June 2028. This would allow a year to complete the processing of applications, which may prove insufficient given the current trend of application and finalisation numbers. Whether or not further legislative change will be needed to allow the scheme to finish processing applications and potentially extend the date for receiving further applications remains uncertain.

• In recent years the number of applications received by the scheme has significantly increased, whilst the rate of finalisation of claims has remained relatively steady.6 As a result, there is a building backlog of claims to the scheme as shown in Figure 1 below. It is estimated that 75% of NRS claims will relate to Residential Care, Education Institutions and Other Religious institutions combined.7

• The scheme offers a less traumatic option for victims of CSA to seek compensation without going through lengthy litigation processes. Settlements for these claims can be up to $150,000, although the average payment, including the cost of counselling, is closer to $100,000. This is lower than the average civil settlement which has been trending upwards to now be more than $300,000.

• NRS claimants receiving a redress payment cannot proceed to seek compensation from a civil claim. PFS has observed cases of claimants receiving an offer of redress from NRS and subsequently rejecting it to pursue a civil settlement.

• ‘Qualifying’ institutions must join the scheme. Failure to do so carries the following consequences:
  • Restricted access to government grants.
  • Being publicly named on the NRS website.
  • Risk losing their charitable status and associated tax concessions and benefits if applicable.

• A new Victorian Redress scheme started accepting applications on 10 December 2024 and is set to run for 18 months. Claimants can receive payments up to $20,000 as well as up to 20 funded counselling sessions and a personal apology. The payable amount is limited if the applicant has previously sought and received payment from the NRS or other similar schemes.

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Related important responses

Towards Healing

Towards Healing is a set of principles and procedures set by the Catholic Church in 1997 as a response to individuals abused by priests and religious or other Catholic Church personnel. While it was revised several times with the latest being 2010, some principles have remained unchanged in that time, including:

• Prevention of abuse.
• An effective response to those guilty of abuse.
• Healing for victims.
• Assistance to other persons affected.

National Response Protocol

The National Response Protocol, established by the Catholic Church in Australia replaced Towards Healing and the Melbourne Response for Catholic entities in Australia effective 1 January 2022. It outlines a consistent approach to handling complaints of abuse and other misconduct.

The Australian Catholic Church set up two companies: Redress Limited in 2018 and Safeguarding Limited in 2020 to act as a direct contact into the NRS for Catholic entities and oversee all safeguarding, child protection and professional standards in Australia.

Special Liability Insurance Scheme (SLIS)

The SLIS is a NSW government scheme, administered by iCare, that provides physical and sexual abuse cover specifically for NGO service providers delivering out-of-home care and youth homelessness services on behalf of the Department of Communities and Justice (DCJ). It covers the cost of civil liability claims as well as NRS payments. The scheme commenced on 1 January 2025 and replaces DCJ’s NGO Short-Term Indemnity Scheme.

There are varying approaches to solving this problem across different Australian states and territories. The ACT implemented a scheme for contracted OOHC service providers, whilst NT determined that its small number of operating service providers did not necessitate the establishment of a scheme for this purpose.