9/25/2025 4:19:06 PM | 4 minute read

Notice in a nutshell: PRA fines reinsurer's London branch after post-Brexit governance failings

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Katie Stephen

Co-Head of the Contentious Financial Services Group

Get in touch

Katie Stephen

Co-Head of the Contentious Financial Services Group

On 28 July 2025, the Prudential Regulation Authority (PRA) published a Final Notice in respect of the London branch of Barents Reinsurance S.A. (the branch), imposing a fine of £1,785,000 for failing to organise and control its affairs responsibly and effectively, as well as governance and regulatory reporting failures for more than two years post Brexit.

Key takeaways

Third-country branches: Following Brexit, it is imperative for third country branches to ensure they fully engage and comply with the UK regulatory framework, including engaging with supervisors in relation to any issues such as reporting failures. Commenting on the decision, the PRA stated that it welcomes participation in the UK market subject to ensuring financial and operational resilience, describing this as “responsible openness”.
Preparing for regulatory change: The PRA expects firms to be proactive in their preparedness for regulatory change and to react appropriately to PRA communications, such as reminders issued to firms of regulatory requirements.
Proportionate governance: A firm’s system of governance should be proportionate to the nature, scale and complexity of its operations. For example, where a branch generates a significant share of the firm’s revenue, consideration should be given to whether centralised oversight is adequate or whether more substantive local governance arrangements would be appropriate.
Internal audit actions: Where internal audit identifies weaknesses in a firm’s governance, controls and risk management, management should seek to remediate those weaknesses promptly, taking a holistic approach and considering whether remediation could be deployed to address similar risks elsewhere in the firm.
Regulatory reporting: Systems and controls need to be adequate to prevent inaccuracies, gaps and delays in regulatory reporting as these may be regarded as signs of stress and indicative of weaknesses in the firm’s ability to manage its business prudently.

Key findings

Decision maker	PRA Settlement Decision Makers
Firm	The London branch of Barents Reinsurance S.A., a Luxembourg-based reinsurer, operating in the UK under the EU’s passporting arrangements
Related decisions	None
Sanction	Fine: £1,785,000 (including 30% settlement discount). In calculating this figure, the PRA determined that a percentage of the branch revenue would be disproportionate and that £3,000,000 would be an appropriate starting point. This was reduced by 15% to take account of co-operation, admissions and remediation by the branch.
Provisions	Fundamental Rule 6 (a firm must organise and control its 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.
Relevant period	July 2021 to October 2023 (over two years)
Factual findings	Prior to Brexit in 2020, Barents Reinsurance S.A. provided reinsurance services to customers in the UK without PRA authorisation by passporting into the UK via its London branch which generated approximately 70% of Barents’ business. On 31 December 2020, the branch entered the temporary permissions regime (TPR) and was considered by the PRA to be a third country branch with deemed permission for its existing reinsurance activities and therefore subject to the PRA Rulebook (with the benefit of certain transitional arrangements). In December 2022, a UK branch Management Committee (UKBMC) was established (prior to this the branch was governed primarily by Barents’ executive committee in Luxembourg). However, the UKBMC did not have approved terms of reference until July 2023, minutes were insufficiently detailed and management information was not sufficiently specific to the branch. During the relevant period, Barents’ internal audit function conducted 20 reviews which found some previous recommendations relating to the branch were wholly or partially outstanding, including with regards to quality of accounting data; outdated or non-existent policies and procedures; inadequate business continuity planning; and third-party due diligence. Actions specific to the branch were not tracked separately. In early 2023, the branch established a significant internal remediation project involving the input of external advisers. A business continuity plan for the branch was also approved. On 6 February 2023, following a request from the PRA, the branch made late submission of its regular supervisory report (due by 8 April 2022). On 24 April 2023, the branch made late submission of its quantitative reporting template (due by 6 April 2023). In July 2023, the branch was required to appoint a skilled person and senior management changes were made. On 29 September 2023, a comprehensive regulatory reporting procedure approved by the governing body of the branch was put in place (prior to this the branch relied on a timetable to track reporting deadlines). In October 2023, a Skilled Person identified areas of weakness in the branch’s governance, oversight, risk and controls including: lack of alignment between governance and regulatory requirements; UKBMC meetings not being formally documented; and lack of branch-specific management information. The Skilled Person acknowledged that the branch had already taken a number of steps to address issues through the internal remediation project and following senior management changes. On 31 October 2023, the branch entered supervised run-off and is winding down its UK operations.
Failings	The branch failed to: organise and control its affairs responsibly and effectively (in breach of Fundamental Rule 6) because it did not: adequately prepare for the regulatory impact of the UK's exit from the EU by failing to ensure that it complied with rules that applied once it entered the TPR, or ensure that certain Internal audit recommendations were implemented in a timely manner so that some matters were outstanding for several years; for much of the relevant period, have formal embedded governance arrangements which were proportionate to its operations or a business continuity plan that adequately took into account the UK business (in breach of Rules 2.3 and 2.6 of the Conditions Governing Business Part of the PRA Rulebook); and have appropriate systems and structures in place to fulfil its reporting requirements, leading to the late submission of certain required regulatory reports between April 2022 and April 2023 (in breach of Rules 2.1 and 2.5 of the Reporting Part of the PRA Rulebook).