Allianz capital management plan gets APRA tick

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16 July 2012

The Australian Prudential Regulation Authority (APRA) has given Allianz Australia accreditation to use an internal capital model the insurer developed for setting its regulatory capital levels.

It is the first time an Australian insurer has received the approval to use its own “bespoke” model to assess the capital it must hold to offset risk.

Insurers’ minimum capital requirements are usually determined by a prescribed model that APRA applies to all of them.

Allianz CFO David Hosking says the company’s model allows Allianz to calculate more accurately the capital it needs to hold based on specific risks in its business.

“Allianz’s use of its internal capital model will mean that it is more risk-sensitive than under the industry-wide APRA model,” he said. “This gives us better credit for our risk management practices.”

Mr Hosking says Allianz’s finance team started working on the model in 2008 and consulted with APRA before submitting a final application last November.

“What was highlighted through the journey is how many critical business decisions need to be made with capital in mind and the impact of those decisions on capital levels,” he said.

He says Allianz is one of a few insurers worldwide to receive such accreditation.