The Prudential Regulation Authority (PRA) has imposed a fine of £10,625,000 on UK Insurance Limited due to its miscalculation of the firm's Solvency II balance sheet during 2023 and 2023.
The miscalculation resulted in UK Insurance overstating its solvency to the PRA and to the market.
UK Insurance would have had to pay a £21.25m fine but qualified for a 50% reduction due to making early admissions and agreeing to resolve the issue via the Early Account Scheme.
The is the first time the Early Account Scheme has been used for the PRA.
UK Insurance is a subsidiary, and principal underwriter of Direct Line Group. Direct Line is now part of Aviva following its acquisition last year. The events all pre-date Aviva’s acquisition.
The PRA said the miscalculation arose due to, “ineffective preventative and detective controls and resourcing issues” in its finance and actuarial teams.
Following the identification of the miscalculation, the Direct Line Group made a regulatory news announcement and notified the PRA without delay.
Sam Woods, deputy governor for prudential regulation and CEO of the PRA, said: “We rely on accurate and reliable data from firms in order to be able to supervise them effectively. This penalty reflects the importance of firms getting their prudential reporting right.”