Barents Slapped with £1.78 Million Fine as PRA Sends a Message on ‘Responsible Openness’

Key Takeaways

• First of Its Kind: Barents Re is the first reinsurer-only firm to be fined by the PRA, highlighting stricter scrutiny post-Brexit.
• Compliance Gaps: The firm failed to plan adequately for UK regulation, lacked proportional governance, and submitted regulatory reports late.
• ‘Responsible Openness’: The PRA used the fine to reinforce its stance that international firms are welcome—so long as they meet UK standards.
• Discounted Penalty: Cooperation and early resolution reduced the fine from £2.55 million to £1.785 million.
• UK Exit in Progress: Barents is now in supervised run-off and is winding down its UK presence.

Deep Dive

The Prudential Regulation Authority (PRA) has issued a £1,785,000 fine against Barents Reinsurance S.A., London Branch, marking the first time it has sanctioned a reinsurer-only firm for significant internal control, governance, and regulatory reporting failures. The fine underscores the PRA’s heightened expectations for firms operating under the post-Brexit regulatory framework, particularly those falling under the UK’s Temporary Permissions Regime (TPR).

According to the Final Notice published July 28, the Luxembourg-based reinsurer’s London operations fell materially short of complying with key PRA rules between July 2021 and October 2023. The firm’s failures included poor regulatory preparedness, inadequate governance proportionality, and lapses in reporting systems, leading to breaches across multiple areas of the PRA Rulebook.

A Warning Shot for Third Country Branches

Barents had been operating in the UK under the EU’s passporting arrangements since February 2017, transitioning into the TPR after Brexit. The TPR was designed to provide continuity for EU firms while they adjusted to UK regulatory oversight. But the PRA found that Barents did not adequately plan for the regulatory impact of the UK’s departure from the EU and failed to implement key Internal Audit recommendations on time.

Barents also lacked a business continuity plan that fully considered its UK operations and did not establish the necessary systems and structures to meet reporting obligations. This led to late submission of regulatory reports, an issue that directly contravened PRA reporting rules.

Shoib Khan, Director of Insurance Supervision at the PRA, made it clear that this enforcement action serves as a broader message:

“Barents fell materially short of its obligations... Third country branches operating in the UK should therefore ensure that they fully engage and comply with the UK regulatory framework.”

Regulatory Breaches Cited

The PRA’s investigation determined that Barents violated:

• Fundamental Rule 6, requiring firms to organise and control their affairs responsibly and effectively
• Rules 2.3 and 2.6 of the Conditions Governing Business, relating to proportionate governance and continuity planning
• Rules 2.1 and 2.5 of the Reporting section, concerning timely and accurate information submission and appropriate systems to support it

Barents’ cooperation during the investigation, including early admission of the breaches, earned it a 15% discount on the total penalty. Its willingness to resolve the matter led to a further 30% reduction, bringing the final fine down from £2.55 million to £1.785 million. The firm has also incurred substantial remediation costs in response to the PRA’s findings and is currently in supervised run-off as of October 31, 2023.

The case is an early test of the PRA’s doctrine of “responsible openness,” a principle that welcomes international participation in the UK’s insurance market but only under conditions of demonstrable operational resilience and regulatory alignment. The phrase, coined in a 2021 speech by then-Executive Director Anna Sweeney, reflects a balancing act between openness and robustness in supervision, particularly relevant as more third-country branches operate in a post-Brexit UK.

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