| Link(s): | PRA fines U K Insurance Limited £10,625,000 | Bank of England final-notice-u-k-insurance-limited.pdf |
Context
The PRA has imposed a financial penalty of £10,625,000 on U K Insurance Limited (UKI Limited) in connection with a miscalculation of their Solvency II balance sheet during 2023 and 2024. This resulted in UKI Limited overstating its solvency to the PRA and to the market.
Key points to note and next actions
- UKI Limited, is a subsidiary and principal underwriter of Direct Line Group (DLG), and now part of Aviva plc.
- The miscalculation arose due to ineffective preventative and detective controls and resourcing issues in its finance and actuarial functions. It went undetected by DLG’s internal controls for a significant period of time.
- Following identification of the miscalculation, DLG made a Regulatory News Service announcement acknowledging the miscalculation and the knock-on effect on the reported SCR Coverage Ratio, and reported the correct figure.
- DLG’s senior management notified the PRA without delay, undertook detailed investigations to ascertain the root cause of the error and remediated the position.
- The PRA permitted UKI Limited to participate in the Early Account Scheme (EAS) and the firm made early admissions and agreed to resolve the matter, thereby qualifying for a 50% enhanced reduction in the amount of the financial penalty which otherwise would have been £21.25m.
- This case is a landmark enforcement outcome for the PRA as it is the first in which the EAS has been used.