Barents Reinsurance S.A. (Barents) has acknowledged the Final Notice issued by the Prudential Regulation Authority (PRA) regarding breaches related to post-Brexit compliance in its London Branch (now in supervised run-off) between July 2021 and October 2023.
The PRA fined Barents a reduced amount of £1,785,000 due to certain governance and reporting failures relating to its London branch—making Barents the first pure reinsurer to be fined by the PRA.
From 28 February 2017, Luxembourg-based Barents 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 (TPR) allowed EU firms to continue operating in the UK for a limited time. During this period, all relevant parts of the PRA Rulebook applied to Barents, including the Fundamental Rules and Third Country Branch Rules. The PRA had written to firms in advance of the TPR to ensure they were operationally ready and understood these expectations.
Between July 2021 and October 2023, the PRA found that Barents failed to organise and control its affairs responsibly and effectively. It did not adequately prepare for the regulatory impact of the UK’s exit from the EU or implement certain internal audit recommendations in a timely manner. Additionally, Barents lacked a system of governance proportionate to its operations. It also failed to maintain a business continuity plan that adequately accounted for its UK business and did not have appropriate systems and structures in place to meet its reporting obligations, resulting in the late submission of certain required regulatory reports.
As a result, Barents was found to have breached 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 Part of the PRA Rulebook, and Rules 2.1 and 2.5 of the Reporting Part of the PRA Rulebook.
The issues identified were primarily administrative and governance-related, and did not affect the firm’s financial stability, underwriting, or day-to-day operations.
While Barents maintained effective governance and oversight through its Luxembourg Executive Committee during the TPR, the PRA noted that it did not establish and embed its UK-based Management Committee early enough, as required under the TPR Third Country Branch rules.
The firm also misunderstood a new reporting obligation in April 2022 and submitted another required report two weeks late in 2023. At the time, Barents implemented Project Horizon, a remediation programme to enhance its governance and reporting processes, which was completed in late 2023.
Barents is reassured that the PRA did “not consider that the breaches were deliberate or reckless” and that, aside from the failure to submit regulatory reports, the breaches identified “did not result in any crystallised risk during the Relevant Period.”
“We take our regulatory obligations seriously and are dedicated to upholding the highest standards,” said Barents Reinsurance S.A.’s spokesperson. “The steps we’ve taken, including Project Horizon, reinforce our operational resilience and ensure we continue to meet regulatory expectations.”
Barents has incurred significant remediation costs and cooperated fully throughout the PRA investigation. Its early admission of failings resulted in a 15% reduction in the penalty calculation. By agreeing to resolve the matter, it qualified for an additional 30% discount, reducing the original fine from £2,550,000 to £1,785,000.
