In 2019, APRA imposed an additional capital requirement of $250 million on Allianz in response to the results of its risk governance self-assessment ordered by the regulator following the Prudential Inquiry into Commonwealth Bank of Australia (CBA) in 2017.
The capital requirement was supposed to remain in place until Allianz strengthened risk management and addressed the issues identified in its self-assessment. In March 2021, APRA accepted a court enforceable undertaking (CEU) from the insurer, which acknowledged its weaknesses and vowed to address them through transformation programs related to risk maturity, compliance, conduct, and culture.
Now, APRA confirmed that Allianz has completed its transformation programs per the commitments and timeframes mentioned in the CEU. Therefore, the regulator has decided to remove the remaining additional capital requirement.
“We are pleased to see the significant progress Allianz has made in addressing APRA’s concerns, although we have emphasised that these weaknesses should not have happened and we will not tolerate any recurrence,” said APRA Deputy Chair Helen Rowell.
Allianz has welcomed APRA’s decision and confirmed that Independent Reviewer reports verified the completion of its transformation programs per the insurer’s undertakings.
Allianz managing director Richard Feledy said the insurer will sustain its improvements and enhance them going forward.
“Allianz has implemented a significant program of work to further strengthen our culture, governance, and risk and compliance frameworks. I am immensely proud of the dedication and commitment of the whole Allianz team in bringing about this uplift,” he said. “Allianz’s investment in uplifting our risk governance and culture will be a key enabler for the creativity and entrepreneurship that will help underpin our continued strong customer focus and growth as we navigate the challenging and ever-changing business and economic environment in which we operate.”
Rowell added: “This episode, and similar penalties applied to other institutions over recent years, should send a message to all APRA-regulated entities that we expect continued high standards when it comes to risk culture, risk governance, and risk management.”
APRA’s decision to remove Allianz’s additional capital requirement was announced amid its calls for improving transparency and market discipline within the financial system.
