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APRA reduces Allianz’s additional capital requirement by $100m

Thursday 10 December 2020

The Australian Prudential Regulation Authority (APRA) will reduce the $250 million additional capital requirement applied to Allianz Australia Limited (Allianz) by $100 million in response to Allianz’s progress in addressing issues identified in the insurer’s risk governance self-assessment.

APRA imposed the additional capital requirement on Allianz in August 2019 following a broader exercise which required 36 banking, insurance and superannuation entities to “self-assess” against certain risk governance expectations. The self-assessments were aimed at gauging whether governance weaknesses identified by APRA’s Prudential Inquiry into Commonwealth Bank of Australia (CBA) also existed in other institutions.  

The weaknesses identified in Allianz’s framework were considered serious enough for APRA to impose the $250 million additional capital charge while the entity set about addressing the issues. 

In recognition of the work undertaken by Allianz to date, APRA has reduced the additional capital requirement to $150 million, effective immediately. The remaining capital add-on will remain in place until Allianz fully completes its remediation work to strengthen risk management and address the issues identified in its self-assessment. 

APRA Executive Board Member Geoff Summerhayes said: “APRA’s decision to reduce Allianz’s additional capital requirement is commensurate with the insurer’s demonstrable progress on its remedial work program and reflects APRA’s risk-based supervisory approach. 

“The residual $150 million capital charge remains appropriate however and removal of the entire charge will not be considered until Allianz embeds the required improvements across its business,” Mr Summerhayes said. 

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The Australian Prudential Regulation Authority (APRA) is the prudential regulator of the financial services industry. It oversees banks, mutuals, general insurance and reinsurance companies, life insurance, private health insurers, friendly societies, and most members of the superannuation industry. APRA currently supervises institutions holding around $9 trillion in assets for Australian depositors, policyholders and superannuation fund members.