The Australian Prudential Regulation Authority (APRA) has applied an additional $20 million capital requirement to RAC Insurance Pty Ltd (RAC) following a governance prudential review.
The review, undertaken by APRA, revealed significant weaknesses in areas of outsourcing controls, conflict management and board decision making.
APRA notes that RAC has reviewed its governance framework and is implementing an action plan to address these issues. However, further effort is required to ensure the changes are executed and embedded successfully, and to verify their effectiveness in addressing governance concerns.
APRA Member Suzanne Smith said: "Board independence and effectiveness are central elements of strong governance and were found to be lacking in our review of RAC. Our prudential standards make it clear that boards are responsible for ensuring the risk management framework is not only implemented but effective in practice.
"The increased capital requirements reflect the heightened prudential risks and should also act as an incentive for RAC to quickly and effectively implement the planned remedial work."
The additional capital requirement takes effect today. RAC has been advised that it will remain in place until its action plan is completed and sustainably embedded.
