The Australian Prudential Regulation Authority (APRA) has taken RAC Insurance, a customer-owned insurer, to task in a governance review for “significant weaknesses” in board-level decision-making, outsourcing controls, and conflict management.
The regulator has mandated RAC Insurance to set aside an additional $20 million in capital, limiting their available funds for operational purposes. While the insurer has stated that it is committed to fulfilling its compliance and regulatory responsibilities, it has not disclosed the specifics of the issues raised.
“Board independence and effectiveness are central elements of strong governance and were found to be lacking in our review,” APRA Executive Board Member Suzanne Smith said. “The increased capital requirements reflect the heightened prudential risks and should also act as an incentive for [the insurer] to quickly and effectively implement the planned remedial work,” she added.