Clients of bankrupt Australian-based insurer HIH Group could face delays in payouts after it emerged that a back-up insurance fund is itself insolvent. The Employees Compensation Assistance Fund has run out of funds and is now facing estimated claims of up to HK$400 million following the collapse of HIH. The fund provides cover for injured workers in the event that their insurance company goes bankrupt. There is little risk that the compensation fund itself could go under. Instead, the Government is expected to step in and provide further funds. However, that could take time, potentially holding up payouts for the 27,000 clients of HIH in Hong Kong. 'I do not think the Government would allow the compensation fund to declare bankruptcy. It is more likely it would give some sort of assistance to the fund,' said Bernard Charnwut Chan, legislator for the insurance industry. The costs of a Government cash injection might be passed on to employers in the shape of a higher levy to support the fund. The compensation fund's predicament has thrown the spotlight on the parlous state of the employee-compensation insurance business in Hong Kong. The 96 insurance companies which offer employee-compensation insurance have suffered huge losses in the past few years due to a price war as well as the increasing amount and number of claims. Mr Chan said the Government should review the employees' compensation system to prevent a crisis. He said the Government should introduce measures to help stem insurers' losses. Introduced in the mid-1980s, employee-compensation insurance is mandatory, forcing all Hong Kong's three million employers to buy cover for staff for workplace injuries. The Hong Kong office of HIH, which went into provisional liquidation in April, was a major provider of employee compensation. HIH was the sixth-largest general insurer in Hong Kong, offering employees' compensation, motor, medical, and professional indemnity insurance cover. Its Australian parent collapsed in March and was unable to return assets to the Hong Kong arm, whose huge losses in the employee compensation business helped to drive it into insolvency. HIH has 7,500 claims totalling HK$1.05 billion - making its collapse the largest in the Hong Kong insurance industry. While some policyholders may need to wait up to 10 years until the liquidation process is completed, employee-compensation and motor-insurance policyholders could be luckier. Compensation funds exist for these two classes of insurance. The fund pays out the claimant, taking its place as a creditor in the liquidation process.