(1)  Where an employer has entered into a contract with a licensed insurer in respect of a liability to a worker in respect of which he is required under section 97 (1) to maintain a policy of insurance, then–

(a) if the employer has applied to take, or takes, advantage of any law relating to bankruptcy, or has compounded, or entered into an arrangement, with his creditors; or

(b) if, where the employer is a body corporate–

(i) the body corporate has commenced to be wound up;

(ii) a receiver or manager of the body corporate's business or undertaking has been duly appointed; or

(iii) possession has been taken by or on behalf of any secured creditors of the body corporate of any property comprised in or subject to their security–

the liabilities of the employer to the worker are transferred to and imposed upon the licensed insurer, notwithstanding any law relating to bankruptcy or the winding-up of bodies corporate.

(2)  On the transfer of an employer's liabilities to the licensed insurer under subsection (1) , the licensed insurer –

(a) retains the same rights, remedies and defences as it would otherwise have had against the employer; and

(b) has the same rights and remedies against the worker as if it were the employer; and

(c) is subject to the same liabilities to the worker as if it were the employer.

(3)  Where under this section the liability of a licensed insurer to a worker is less than the liability of the employer to the worker, the worker –

(a) may prove for the balance in the bankruptcy or liquidation; or

(b) may recover the balance from the receiver or manager in the bankruptcy or liquidation –

but the priority conferred by subsection (4) does not apply to that balance.

(4)  The amount due in respect of any compensation or liability for compensation accrued before the date of–

(a) the bankruptcy;

(b) the commencement of a winding-up; or

(c) the appointment of a receiver or manager or the taking of possession as provided in subsection (1) (b) (iii) –

as the case may be, shall be included among the debts that, under section 433 or section 556 of the Corporations Act, as the case may be, are to be paid in priority to other debts, and that amount is subject to the provisions of such of those sections as are applicable to the particular case.

(5)  If any compensation to which the provisions of subsection (4) apply is payable by weekly payments, the amount of compensation for the purposes of that subsection shall be deemed to be the amount of the lump sum for which the payment, if redeemable, could be redeemed if the employer concerned made application for that purpose under this Act.

(6)  This section does not apply where a body corporate is wound up voluntarily merely for the purposes of reconstruction or of amalgamation with another body corporate.

(7)  Nothing in the foregoing provisions of this section shall be construed as –

(a) requiring a worker to pay to a licensed insurer any sum that was or becomes due and owing to the licensed insurer by the employer in respect of any premium payable by the employer in relation to a policy of insurance obtained by him from the licensed insurer; or

(b) entitling a licensed insurer to retain from, or to set off against, any payments due to the worker under this Act any sum so due and owing.