Failure to comply with regulation on governance and oversight of a wide range of activities has led to a fine of £9,695,000 ($10,855,152) for MS Amlin Underwriting Limited (MSAUL). The UK’s Prudential Regulation Authority (PRA) imposed the fine for failings that took place between September 1, 2014 and December 31, 2019.

“It is vital that firms have in place appropriate governance, oversight and risk management controls, and that firms remediate issues identified by the PRA in a full and timely manner. The penalty reflects the seriousness of MSAUL’s failure to meet the expected standards in this case, and should deter similar conduct by other firms,” said Sam Woods, Deputy Governor for Prudential Regulation and Chief Executive Officer of the PRA.

Business reorganized

MSAUL reorganized its business into three units from September 2014 to fit in with its growth strategy. Each underwrote business on the firm’s behalf. The PRA raised concerns about the risks this strategy, and prevailing market conditions, posed at the time.

After a PRA investigation, MSAUL was found to have breached Fundamental Rules 5 and 6 of the PRA Rulebook. Rule 5 requires firms to have effective risk strategies and risk management systems in place, while Rule 6 requires firms to “organize and control their affairs responsibly and effectively”.

No effective challenge

Among issues picked up on by the investigation were the failure to clearly delineate between first and second lines of defense; absence of a management system that allowed effective challenge, management and decision making; absence of appropriate and consistently available information to inform Board discussions; and failure to operate data quality systems and controls.

MSAUL’s cooperation in resolving the matter meant the fine was reduced by 30%.