APRA inserts AU$20m more in capital requirement to RAC Insurance

APRA saw significant weaknesses in RAC's outsourcing controls, conflict management, and board decision-making processes.

The Australian Prudential Regulation Authority (APRA) has imposed an extra AU$20m capital requirement on RAC Insurance (RAC) following a governance prudential review.

This review, conducted by APRA, exposed significant weaknesses in RAC's outsourcing controls, conflict management, and board decision-making processes.

APRA acknowledges that RAC has initiated a review of its governance framework and is actively implementing an action plan to address these identified issues. 

However, APRA emphasises that more effort is necessary to ensure that these changes are not only carried out but also effectively integrated and verified to address governance concerns.

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Suzanne Smith, an APRA Member, emphasized the importance of board independence and effectiveness in strong governance and noted that these elements were lacking in RAC's review. 

APRA's prudential standards underscore the board's responsibility to ensure the effectiveness of the risk management framework in practice.

The additional capital requirement goes into effect immediately and will remain in place until RAC successfully completes its action plan and ensures the sustainable implementation of the necessary changes.