Prudential regulator issues ‘first of a kindʼ £1.8 million fine to reinsurer

The UK Prudential Regulation Authority (PRA) has fined Barents Reinsurance SA’s London branch £1.8 million for controls, governance and reporting failings. The fine is the first of its kind for a reinsurer.

The Luxembourg-based property and casualty reinsurer has operated in the UK under an European Union passport since February 2017, and entered the PRA’s Temporary Permission Regime (TPR) following the end of the Brexit transition in December 2020.

Firms operating under the TPR were required to adhere to the regulator’s Fundamental Rules and Third Country Branch Rules. However, the PRA investigation concluded that Barents Re had breached Fundamental Rule 6 by failing to organise and control its affairs responsibly and effectively.

Barents further failed to submit required regulatory reports for more than a year from April 8, 2022, to April 24, 2023, in breach of rules 2.1 and 2.5 of the PRA Rulebook. It also failed to have a proportionate governance system in place and lacked a business continuity plan adequate for its UK business, according to the final notice.

“Barents fell materially short of its obligations to comply with the PRA rules applicable to third country branches once subject to the UK regulatory framework. As a result, it failed to organise and control its affairs responsibly and effectively, and to have appropriate governance and reporting arrangements in place,” said PRA director of insurance supervision Shoib Khan, in a statement accompanying the final notice.

The firm has been in supervised run-off (SRO) since October 31, 2023, and is in the process of winding down its UK operations. This permits Barents to perform regulated activities in relation to its existing business but it cannot write any new business.  

Khan said the notice should stand as a warning to all third country branches operating in the UK — and they “should therefore ensure that they fully engage and comply with the UK regulatory framework”.

The final notice underlines the regulatorʼs expectations for those operating in the UK via a third country branch.  

This includes a branch maintaining proper governance that is proportionate to the nature, scale and complexity of its operations. A firm’s systems and controls must also be “sufficiently effective and embedded such that, for example, its risk management system is able to measure, monitor, manage and report on a continuous basis the risks to which the firm is, or could be, exposed”.