The Prudential Regulation Authority (PRA) has imposed a significant financial penalty of £4,165,000 on HDI Global SE, a UK-regulated branch of a German insurance company, for repeated failures in submitting accurate data. The inaccuracies, which spanned from August 2021 to August 2024, pertained to critical information regarding Financial Services Compensation Scheme (FSCS) Liabilities and FSCS Fee Tariff data. This included instances where attempts to rectify previous errors also contained further inaccuracies.
According to the PRA, the persistent errors stemmed from HDI Global SE's failure to exercise due skill, care, and diligence in ensuring its data calculations were correct. The firm notably failed to consult the PRA Rulebook or relevant guidance on FSCS-covered liabilities and the methodology for calculating FSCS Fee Tariff data prior to the summer of 2023. Furthermore, a lack of effective written processes, clear accountability, internal oversight, and challenge within the organisation contributed to the submission of unreliable data.
Misreporting of FSCS Liabilities is a serious concern for the PRA, as it can impede the regulator's ability to identify material risks within the financial system. It can also lead to firms underpaying their required contributions to the FSCS, potentially impacting the scheme's ability to protect consumers. The FSCS is a vital safety net for UK consumers, protecting them if financial services firms fail.
HDI Global SE has since undertaken a number of remediation initiatives, submitting corrected historical data and making additional levy payments to the FSCS to address the past underpayments. The firm's cooperation in the PRA's Early Account Scheme (EAS), which involved providing a detailed account of the circumstances leading to the breaches, was acknowledged by the regulator and resulted in a 30% reduction in the initial penalty, which would otherwise have been £5,950,000.
Gareth Truran, Executive Director for Insurance Supervision at the PRA, emphasised the importance of accurate data submissions. He stated that the PRA relies on firms providing complete and timely data to assess risks, monitor compliance, make prudential decisions, and ensure FSCS levies are correctly calculated. He underscored that maintaining effective systems and controls for data integrity is fundamental to the PRA's objective of ensuring the safety and soundness of regulated firms.