The Prudential Regulation Authority (PRA) has imposed a fine of £1,785,000 on Barents Reinsurance S.A., London Branch, for governance and regulatory reporting failures. This marks the first instance of the PRA fining a firm that operates solely as a reinsurer. Barents Reinsurance S.A., based in Luxembourg, began operating in the UK from February 28, 2017, under EU passporting arrangements. Following Brexit, the Temporary Permissions Regime (TPR) allowed EU firms to continue operations temporarily.
The PRA’s investigation revealed that between July 2021 and October 2023, Barents did not adequately prepare for regulatory changes post-Brexit. The company failed to implement internal audit recommendations promptly and lacked a governance system proportional to its operations. It also did not have a sufficient business continuity plan or appropriate systems for timely regulatory reporting.
These shortcomings led to breaches of several rules in the PRA Rulebook, including Fundamental Rule 6 and specific conditions governing business and reporting parts. Shoib Khan, Director of Insurance Supervision at 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.”
Barents has taken steps to address these issues and incurred significant remediation costs. Their cooperation during the investigation led to a 15% reduction in the penalty calculation. By agreeing to resolve the matter early, Barents qualified for an additional 30% reduction in their fine; otherwise, it would have been £2,550,000.
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