Allianz Australia enters court enforceable undertaking with APRA

Allianz Australia has entered into a court enforceable undertaking (CEU) with the Australian Prudential Regulation Authority (APRA), acknowledging its previous risk and compliance weaknesses and emphasising its commitment to addressing these issues.

The CEU allows Allianz to complete a series of transformation programmes relating to risk maturity, compliance, conduct, culture, and governance in a timeframe agreed with APRA.

The programmes include:

• assigning a responsible person(s) to be accountable for the successful completion of the transformation programmes;
• providing written confirmation from the board of Allianz that all components of the transformation programmes have been completed; and
• appointing independent reviewers to provide written reports on the status of the transformation programmes, whether they are operationally effective, and what further work may be required to make them so.

The CEU was considered as part of the Royal Commission into Misconduct in the Banking, Superannuation, and Financial Services Industry and the subject of a referral by the Commissioner to APRA.

Allianz SE, Allianz Australia’s parent company, recognises that it did not meet APRA’s expectations for robust oversight by an offshore parent of an APRA-regulated Australian insurance company. The firm acknowledged in the CEU that it took a narrow, legalistic view of compliance and had inadequate processes to escalate and address compliance issues. It also admitted a lack of awareness of such matters at the board and senior management level. 

The insurer remains subject to an additional $150 million capital requirement, and APRA has advised that effective and sustainable implementation of its transformation programmes is integral to any decision to remove this add-on.

APRA Deputy Chair John Lonsdale said: “The CEU will ensure the deficiencies that prevailed within Allianz for several years are finally remediated. It also highlights the importance of robust oversight by parent entities of Australian-based insurers, with Allianz’s German parent, Allianz SE, acknowledging it fell significantly short of APRA’s expectations in this regard. 

“While Allianz has already made some positive changes, their commitment to the agreed actions are a significant step forward in fixing the serious deficiencies in their risk management frameworks.  We do not expect, nor would we tolerate, a repeat of Allianz’s past shortcomings.”