The Australian Prudential Regulation Authority (APRA) has applied an additional $2 million capital requirement to Sovereign Insurance Australia (SIA). According to APRA, the addition reflects the insurer’s heightened risk profile due to weaknesses in managing non-financial risk and regulatory reporting.
The regulator said it has identified serious deficiencies in SIA’s risk management framework and its management of operational risk. In a media release, APRA said its concerns “are amplified by SIA’s failure to comply with requirements of prudential standards, remediate issues in a timely and effective manner, and lodge audited financial accounts with APRA.”
APRA member Suzanne Smith said insurance underpins financial stability for millions of Australians.
“APRA’s prudential framework and active supervision are critical to ensuring insurers meet their commitments,” she said. “The additional capital requirement reflects the heightened prudential risks and should incentivise SIA to quickly and effectively remediate its risk management framework and management of operational risk.”
She said the regulator will take further action if necessary to ensure policyholder interests are protected.
The additional capital requirement takes effect today, the release said, and will remain in place until “all concerns” and “all weaknesses” are rectified.
Insurance Business has contacted SIA for comment and will update this story if a response is received.
