The Prudential Regulation Authority has fined Barents Reinsurance £1,785,000 for failing to organise and control its affairs responsibly and effectively, as well as governance and regulatory reporting failures. This is the first time the PRA has fined a firm operating purely as a reinsurer.
Barents Reinsurance S.A. is a Luxembourg-based reinsurer. From February 2017, it operated in the UK via a branch under the EU’s passporting arrangements.
Following the UK’s withdrawal from the EU, the ‘Temporary Permissions Regime’ permitted EU firms to continue their activities for a limited period of time. When the TPR commenced, all relevant parts of the PRA Rulebook applied to Barents, including the PRA’s Fundamental Rules and Third Country Branch Rules (the latter subject to certain transitional relief). The PRA wrote to firms before the TPR commenced to ensure that they were operationally ready and understood the PRA’s expectations of firms operating within the TPR.
The PRA’s investigation found that from July 2021 to October 2023, Barents failed to organise and control its affairs responsibly and effectively because it did not adequately prepare for the regulatory impact of the UK's exit from the EU, or ensure that certain internal audit recommendations were implemented in a timely manner.
The PRA said Barents also failed to have a system of governance proportionate to its operations or have a business continuity plan that adequately took into account the UK business; and have appropriate systems and structures in place to fulfil its reporting requirements, leading to the late submission of certain required regulatory reports.
Barents has sought to remediate the weaknesses identified and has incurred substantive remediation costs to date.
Barents’ cooperation throughout the investigation, including the early admission of failures, resulted in a 15% reduction in the penalty calculation. Barents agreed to resolve the matter and therefore qualified for a 30% reduction in the fine, without which the fine imposed by the PRA would have been £2,550,000.
Shoib Khan, director of insurance supervision for the PRA, said: “The PRA welcomes international participation in the UK insurance (including reinsurance) market, subject to safeguards to ensure that this is accompanied by financial and operational resilience. The PRA terms this ‘responsible openness’.
"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.
"Third country branches operating in the UK should therefore ensure that they fully engage and comply with the UK regulatory framework.”
