Retirement
Allianz slammed with $250m increase to capital requirement
Allianz Australia’s self-assessment of its risk governance practices has uncovered major holes and has resulted in APRA requiring the insurer to hold an additional $250 million in capital.
Allianz slammed with $250m increase to capital requirement
Allianz Australia’s self-assessment of its risk governance practices has uncovered major holes and has resulted in APRA requiring the insurer to hold an additional $250 million in capital.
The prudential regulator announced that the requirement reflects issues identified within the self-assessment, and generally reflects weaknesses in non-financial risk management, murky accountability and a culture of risk that could be improved.
Allianz was one of 36 banks, insurers and superannuation licensees that APRA said it had asked to self-assess last year, with the aim of “gauging whether governance weaknesses identified by APRA’s Prudential Inquiry into Commonwealth Bank of Australia also existed elsewhere”.
APRA said it had advised Allianz that the extra $250 million capital requirement “will remain in place until it completes remediation work underway to strengthen risk management and closes gaps identified in its self-assessment”.
It’s the fifth entity to have an additional capital requirement imposed due to heightened operational risk, after APRA slammed the Commonwealth Bank with a $1 billion requirement last May, and has more recently imposed additional $500 million capital requirements on ANZ, NAB and Westpac.
According to APRA executive board member Geoff Summerhayes, the most recent decision sends a message to all insurers.
“The risk governance self-assessments not only demonstrated that the issues identified in the CBA inquiry exist beyond that institution — they also go beyond the banking sector,” he outlined.
Outlining that APRA-regulated general insurers paid out $27.5 billion to their policyholders last financial year, Mr Summerhayes considered that “with Australians relying on these policies to financially protect them when things go wrong, it’s essential that insurers have in place appropriate internal processes to honour those commitments”.
“By imposing this additional capital requirement, APRA is providing a financial incentive for Allianz to quickly and effectively implement its planned remediation work,” the board member stated.
“We also want to send a message to the broader insurance and superannuation industries that APRA expects the same high standards of risk management, including for non-financial risks, as we do for the banks.”
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