Auto & General Insurance told to fix risk management issues
Budget Direct owner Auto & General Insurance has engaged an independent expert to review its risk management processes after the regulator uncovered “significant” weaknesses.
The insurer must rectify the issues and has been hit with an additional $50 million capital requirement due to “heightened” prudential risk, the Australian Prudential Regulation Authority (APRA) says.
“Auto & General is required to undertake a root-cause analysis to identify the drivers that have contributed to the weaknesses, and to develop and implement an APRA-approved risk remediation program,” the authority said. “Execution of the program is to be subject to assurance by an independent third party.”
The insurer’s issues include capability and capacity weaknesses in the risk function, ineffectiveness of the “three lines of defence” model and weak risk reporting, APRA says.
The extra capital requirement is in the form of an operational risk charge and will remain in place until the regulator is satisfied the weaknesses have been remediated.
“We will continue our program of work focused on ensuring our governance, culture and risk frameworks meet or exceed industry best practice,” an Auto & General Insurance spokesperson told insuranceNEWS.com.au. “We understand and support APRA’s focus on these important matters and will work closely with it through this process.”
The spokesperson says the additional capital requirement will have no impact on the insurer’s business.