The Prudential Regulation Authority (PRA) has fined Direct Line's main underwriting subsidiary, UK Insurance Limited (UKI), £10.6 million for incorrectly calculating its financial strength between 2023 and 2024.
The regulator said UKI misstated its balance sheet due to ineffective preventative and detective controls, as well as resourcing issues, leading to an overstatement of its financial position to the PRA and the wider market.
The fine was halved from £21.3 million under the early account scheme, reflecting Direct Line's prompt admission and remedial actions. This marks the first case to use the scheme, which the PRA said makes enforcement more efficient when firms are open and candid.
Direct Line alerted the stock market in 2024 upon discovering the errors and reported corrected figures. It then notified the PRA, launched investigations, and took corrective actions. Sam Woods, deputy governor for prudential regulation and PRA chief executive, emphasised the importance of accurate prudential reporting.
Aviva, which acquired Direct Line for £3.7 billion last year, stated it was fully aware of the matter before agreeing to the acquisition and has provided for the fine in its balance sheet. The insurer confirmed that the resolution has no impact on the integration process or expected financial benefits.
