The Prudential Regulation Authority (PRA) in the UK has fined U K Insurance Limited (UKI Limited) £10m ($14m) after the company miscalculated figures on its solvency II balance sheet for 2023 and 2024.
This error led to inflated reports of the company’s solvency to both regulators and the market.
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UKI Limited, a core subsidiary and main underwriter for Direct Line Group (DLG), is now under the ownership of Aviva.
According to the PRA, inadequate controls and resourcing problems within UKI’s finance and actuarial departments resulted in the mistake remaining unnoticed by DLG’s internal systems for a lengthy period.
After the issue came to light, DLG issued a regulatory news service update acknowledging the error and its effect on the previously reported solvency capital requirement coverage ratio.
Corrected figures were subsequently provided.
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By GlobalDataThe company’s senior leadership informed the PRA without delay and investigated the cause before taking steps to resolve it.
Since Aviva’s acquisition of DLG in 2025, further improvements have been made to DLG’s financial and actuarial oversight.
UKI Limited was allowed by the PRA to take part in its early account scheme (EAS).
By making early admissions and agreeing to settle, the company received a 50% reduction to its fine, which would otherwise have totalled £21.25m.
This marks the first time the PRA has used its EAS in an enforcement action.
PRA CEO and Bank of England deputy governor for prudential regulation Sam Woods 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.
“DLG and Aviva’s proactive engagement with the PRA, via the EAS, shows how enforcement action can be more efficient when firms are open, candid and accept responsibility for failings at an early stage.”
In response, Aviva said it was “fully aware of this matter prior to agreeing the terms of the acquisition of DLG and the outcome is fully provided for in the acquisition balance sheet”.
“The resolution of this matter has no impact on the integration of DLG into Aviva, which is proceeding well, and no impact on the expected financial benefits arising from the acquisition,” it added.
