MS Amlin Underwriting fined $11M over risk, governance lapses

The Bank of England’s regulatory arm found compliance failures regarding the firm’s governance and oversight of underwriting, underwriting controls, management information, data quality, and risk management strategies and systems between September 2014 and December 2019.

In its final decision notice published Thursday, the PRA said the fragmented nature of MSAUL—it was divided into three strategic business units—meant board oversight and input into the business plan and strategy were ineffective. The regulator said the governance structure was so bad, the nature and scale of underwriting losses worth £545 million (U.S. $611 million) in 2017 “came as a surprise to underwriting management and the board.”

The case marks the PRA’s first enforcement action of the year.

The regulator’s investigation found—despite repeated warnings—MSAUL failed to:

• Embed a strong or effective risk culture within the business;
• Clearly define responsibilities between the first and second lines of defense;
• Put in place appropriate and/or effective risk mitigation strategies;
• Establish an effective and transparent system of governance that allowed for effective challenge, management, and decision-making;
• Ensure management information was “adequate, consistently available, and appropriate”;
• Collect data properly and have appropriate data quality controls; and
• Have sufficient underwriting controls in place.

The company had identified risk and compliance staffing levels were a concern over the course of the relevant period.

Given MSAUL’s status as a “Category 2” firm, the PRA said any serious risk management or governance failures could cause “significant” disruption to a substantial number of policyholders, as well as the U.K.’s financial system, because of the firm’s size and type of business.

MSAUL agreed to resolve the matter and qualified for a 30 percent reduction from the PRA’s initially proposed fine of £13.85 million (U.S. $15.6 million).

“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 at the PRA, in a news release.

In an emailed statement, MSAUL said, “This draws a clear and final line under legacy matters which culminated in our adverse financial performance in 2017.

“The new management team, established in 2020, has completed a comprehensive program of structural and strategic changes which has dealt with these historical matters and supported a return to profitable growth. We look forward to further building on that momentum.”