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Australia’s financial services regulator will apply an additional AU$250 million ($170 million) capital requirement to Allianz Australia Ltd. to reflect issues identified in the insurer’s risk governance self-assessment.
Allianz was one of 36 banks, insurers and superannuation licensees that the Australian Prudential Regulation Authority asked to undertake a self-assessment last year aimed at gauging whether governance weaknesses identified by the regulator’s inquiry into Commonwealth Bank of Australia existed in other financial institutions, according to a statement by the regulator on Wednesday. The self-assessments generally confirmed that many of the issues identified in the inquiry were not unique to CBA, including the need to strengthen nonfinancial risk management.
Allianz was the fifth APRA-regulated entity to have an additional capital requirement imposed due to heightened operational risk. The regulator 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, according to the statement.
APRA’s decision sends a message to all insurers, Geoff Summerhayes, APRA executive board member, said in a statement.
“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 said.
APRA-regulated general insurers paid out AU$27.5 billion to their policyholders in the last financial year, he noted.
“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,” Mr. Summerhayes said.
The additional capital requirement will take effect on Sept. 1.
"Allianz has a comprehensive program of work arising out of the (Risk Governance Self Assessment) and will continue to work with APRA in relation to this," an insurer spokesman said in an emailed statement.
Germany-based Allianz Global Corporate and Specialty S.E.'s Pacific unit will cease writing long-tail corporate risks in Australia and close its operations in New Zealand, starting Sept. 1, Asia Insurance Review reported. The insurer said that the decision concerns only the financial lines and liability divisions of its Australian and New Zealand branches.