The UK's Prudential Regulation Authority (PRA) has fined Barents Reinsurance S.A. (Barents Re), London Branch, £1.79 million for multiple failings related to governance, controls, and regulatory reporting during its operations under the UK's Temporary Permissions Regime (TPR).
This marks the first time the PRA has issued a financial penalty against a reinsurer operating solely in that capacity.
Barents Re, headquartered in Luxembourg, began operating in the UK on February 28, 2017, under the European Union’s passporting arrangements. Following the UK's exit from the EU, Barents continued its UK operations under the TPR, a transitional regime allowing EU firms to operate temporarily while adjusting to the UK regulatory framework.
Under the TPR, Barents became subject to the full scope of the PRA Rulebook, including its Fundamental Rules and, with transitional relief, the Third Country Branch Rules.
The PRA found that from July 2021 to October 2023, Barents failed to organize and control its UK operations responsibly. It did not sufficiently prepare for the regulatory implications of Brexit and did not act in a timely manner on internal audit recommendations.
The company lacked a governance framework proportionate to its UK operations and did not maintain a business continuity plan that adequately accounted for its UK business. The firm also failed to meet regulatory reporting requirements, resulting in late submissions of mandatory reports.
Shoib Khan, director of insurance supervision at the PRA, reiterated that international reinsurers are welcome in the UK market, if they meet standards of financial and operational resilience.
“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 organize and control its affairs responsibly and effectively, and to have appropriate governance and reporting arrangements in place,” Khan said.
On their end, Barents Re acknowledged the notice, stating that the identified issues stemmed from administrative and governance lapses during the TPR period.
According to the company, these matters did not affect its financial stability, underwriting, or daily operations. Barents noted that while it maintained governance through its Luxembourg Executive Committee, it did not establish a UK-based management committee in time to comply with Third Country Branch rules.
The company also pointed to a misunderstanding of a new reporting obligation in April 2022 and a separate incident involving a late filing in 2023. In response, Barents initiated “Project Horizon,” a governance and reporting remediation program that was completed by the end of 2023.
“We take our regulatory obligations seriously and are dedicated to upholding the highest standards,” a company spokesperson said. “The steps we’ve taken, including Project Horizon, reinforce our operational resilience and ensure we continue to meet regulatory expectations.”
Barents has since agreed to resolve the matter and received a 30% reduction in the fine. It also received a 15% discount for cooperation, including early admission of the failings. Without these reductions, the fine would have totaled £2.55 million.
Despite the issues raised by the PRA, Barents Re maintains strong financial standing, holding an A (Excellent) financial strength rating from AM Best and an A3 rating from Moody’s.
In its 2023 Solvency and Financial Condition Report, Barents disclosed gross earned premiums of €158.8 million and a solvency ratio of 189%, indicating strong regulatory capital coverage. The combined ratio rose to 92% for the year, up from 73% in 2022, partly influenced by elevated claims experience and governance-related investment.
The company’s London branch ceased underwriting and formally entered supervised run-off on November 1, 2023
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