After conducting a self-assessment in 2018, Allianz Australia, a division of global re/insurer Allianz, has had an additional $250 million capital requirement imposed by the Australian Prudential Regulation Authority (APRA).
Allianz was one of 36 banks, insurers and superannuation companies that the APRA asked to conduct a self-assessment in 2018, which were designed to understand if any governance weaknesses identified by the APRA’s Prudential Inquiry into Commonwealth Bank Australia (CBA), also existed in other institutions.
Ultimately, the self-assessments confirmed that the issues faced by the CBA were not unique, with the need to strengthen non-financial risk management, ensure accountabilities are clear, cascaded and enforced, and enhance risk culture needed in other institutions across the insurance, banking and superannuation sectors.
Allianz Australia is now the fifth entity regulated by the APRA that has had an additional capital requirement imposed as a result of elevated operational risks, after the CBA in May 2018, and additional requirements in July imposed on ANZ, National Australia Bank, and Westpac (each at $500 million).
APRA Executive Board Member, Geoff Summerhayes, commented: “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.
“Last financial year, APRA-regulated general insurers paid out $27.5 billion to their policyholders. 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. 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.”
The APRA has reportedly advised Allianz that the $250 million additional capital requirement will remain in-force until the insurer completes remediation work underway to improve risk management, and also close gaps identified in its self-assessment.