Insurance industry welcomes UK Government’s captive insurance regime plans
The UK government’s announcement that it will facilitate the creation of a UK regime for captive insurance companies, enhancing the UK’s stature as a leading insurance marketplace has been greeted positively by many in the insurance industry.
Broker Marsh said that it urges that the regime, when implemented, ensures that the UK becomes a dynamic, innovative, and globally competitive hub for a wide range of captive insurance services offering enhanced risk management capabilities and choices for organisations of all sizes. Captive insurance is a long-established risk management tool, offering organisations greater choice in how they build their risk management strategy. It can help address traditional and emerging risk management pain points, enabling a greater control of risk and reduced costs.
Marsh said that the announcement supports the utilisation of captives for a broad range of risks, enabling captives to tailor their risk transfer strategies more effectively and for captive business owners to offer enhanced services to clients. The announcement also opens the potential for the formation of more flexible, cost-effective vehicles, such as protected cell companies (PCCs), that would benefit smaller and mid-size companies.
Chris Lay, chief executive of Marsh McLennan, UK, and a long-time proponent of a UK-based captives regime, said: "We welcome the government’s decision, which will make the UK a full-service insurance centre through the addition of a captive insurance regime. Having previously run Marsh’s global captive business, I know that this has the potential to enable organisations of all sizes in the UK and around the world to have access to greater choice in how they manage risk and build the offering of our already world-leading insurance sector. We need to ensure that the new captive framework will not only allow the UK insurance market to further demonstrate its reputation for innovation but also that captives can be formed as seamlessly as they are in other jurisdictions."
Kathryn Moore, Head of Non-Life at leading independent insurance consultancy Broadstone, commented the consultation outcome marks an inflection point for the captive insurance market in the UK.
“By proposing a dedicated framework for the market that includes lower capital and reporting requirements as well as streamlined authorisation, the Government is sending a clear signal that the UK intends to become a global hub for captive insurance,” she said.
Martina Neary, EY UK Insurance Leader, commented that the: “announcement by the Chancellor of a ‘lighter-touch’ UK captive insurance regulatory regime has the potential to drive opportunities for both multinational and domestically focused groups and boost overall UK competitiveness. This new framework promises greater flexibility, simplified compliance, reduced capital requirements, and streamlined reporting, which should better harness the potential of the UK’s unrivalled insurance infrastructure.
“With the UK becoming a more accessible domicile for captives under these proposals, UK-headquartered multinational groups are likely to benefit from onshoring or expanding their captive operations, leading to better risk management and easier market access. In addition, the new regime enables regulatory and tax domiciles to be aligned, reducing tax complexities for UK-headquartered groups, while those groups focused on the UK market with offshore captives can simplify their operations. Although navigating the new landscape will undoubtedly have its complexities, the potential benefits and opportunities for businesses will likely be substantial.”
Karim Haji, global and UK head of financial services at KPMG. On insurance and risk transfer innovation said: “The introduction of a UK captive insurance regime and the consultation on broadening access to insurance-linked securities mark significant progress in making the UK more competitive as an international insurance and risk transfer solution hub. These proposals align with the industry’s calls for modernising the UK's regulatory environment and could support more sophisticated risk management solutions not just for financial services institutions, but for businesses across the real economy.”
UK risk management association Airmic’s chief executive, Julia Graham, said the move is a boost for UK businesses, giving existing captives and prospective captive owners a greater diversity and depth of choice as this alternative risk transfer strategy becomes an increasingly mainstream solution.
“The UK is home to some of the top risk and risk-financing expertise in the world,” said Graham. “With global demand for captives growing, having an onshore captive domicile alongside the world’s most advanced commercial insurance market will be a huge asset to our members and other captive owners. It will strengthen their options to deploy captives in new areas and to achieve intelligent and resilient risk financing strategies.”
Airmic member organisations collectively spend more than £5.1 billion in annual premium through their captives and hold more than £22.6 billion assets under captive management. Of those who do not use a captive, almost three-quarters are exploring the possibility of forming a captive in the future, according to an Airmic member survey published in March this year.
The Association welcomes the government’s consultation response which highlights the need for “proportionately lower capital and reporting requirements and facilitating faster authorisations for captive insurers”, as well as a “broader scope than originally proposed” for the captive regime.
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