The prudential regulator has ordered KeyInvest to hold an additional $5.5 million in capital after it found shortcomings in the life insurer’s risk management framework.

KeyInvest must also design and implement a remediation plan under extra licence conditions imposed by the Australian Prudential Regulation Authority.

Another condition requires the business to develop an APRA-approved board renewal plan.

“It is the responsibility of boards to ensure that risk management frameworks are implemented and effective,” APRA member Suzanne Smith said.

“The increased capital requirement reflects the heightened prudential risks and compliance concerns, and should incentivise KeyInvest to complete remedial work.”

The $5.5 million requirement is applied to the KeyInvest management fund as an operational risk capital add-on, and will remain in place until APRA is satisfied its concerns have been addressed.

KeyInvest has accepted the findings and taken steps to address the recommendations.

“However, further effort is required to implement and confirm the effectiveness of the remediation plan,” APRA said.

KeyInvest CEO Craig Brooke says the business has been “diligently working on [the] comprehensive remediation plan” since November.

“We regard APRA’s announcement as a constructive step forward, and it’s the result of highly productive conversations we’ve been having with APRA for several months now,” he told insuranceNEWS.com.au.

“We look forward to continuing to work closely with APRA in the future to finalise this work to their satisfaction.

“We will continue to work with APRA and evolve our risk management framework as we build a strong and resilient KeyInvest for future generations.”