Remaining $150 million capital penalty on Allianz removed

Allianz Australia has finished working on risk governance weaknesses as part of a court enforceable undertaking (CEU), paving the way for the prudential regulator to remove the remaining $150 million additional capital requirement it imposed on the insurer.

The Australian Prudential Regulation Authority (APRA) accepted the CEU in March last year, after the insurer acknowledged its past weaknesses and committed to rectify them through a series of “transformation” programs related to risk maturity, compliance, conduct and culture.

APRA says it is satisfied the programs were completed in accordance with the commitments and timeframes set out in the CEU, and removed the $150 million penalty earlier this week.

“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,” Deputy Chair Helen Rowell said

“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.”

The capital penalty was part of an initial $250 million that APRA applied to Allianz in 2019, in response to issues raised in a risk governance self-assessment that the insurer was asked to undertake.

The capital penalty was to remain in place until the insurer completed remediation work to strengthen risk management and close gaps identified in its self-assessment, and was lowered to $150 million in December 2020 in recognition of Allianz’s progress in addressing these issues.

Allianz says APRA’s decision to remove the remaining capital requirement acknowledges the “successful” completion of the transformation programs, which has been verified by Independent Reviewer reports, in accordance with Allianz’s undertakings.

“Allianz has implemented a significant program of work to further strengthen our culture, governance, and risk and compliance frameworks,” MD Richard Feledy said.

“I am immensely proud of the dedication and commitment of the whole Allianz team in bringing about this uplift, and I am confident this will not only be sustained, but continuously enhanced going forward.”

He says the insurer’s investment in uplifting its 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”.