‘It’s coming home’: captives may return to UK if PRA nails regulatory regime

There are tangible competitive advantages to having a captive in the same domicile as its parent – and if the UK gets its new captive regime right, an onshore pivot could take place, where companies with offshore captive insurers re-domicile those entities.

That was the view offered by Shoib Khan, director of insurance supervision at the Prudential Regulation Authority (PRA), in a keynote speech delivered yesterday (June 16) at Airmic’s annual conference in Birmingham. In a talk peppered with football analogies, in the context of the World Cup, he was in bullish mood. “It’s coming home; captives are coming home,” he said.

The journey towards such a regime started in September 2023. In 2025, the PRA gained the powers to amend its rulebook to create a bespoke captive regime. He confirmed that a consultation paper setting out the PRA’s plans for a the regime will be released soon and offered glimpses into some of the regulator’s ambitions.

The benefits of access to captive insurance are clear – and their use has the potential to advance the PRA's primary and secondary objectives, he said. Captives can aid robust risk financing and risk management tools, helping companies match capital more closely to risks and bridge protection gaps where commercial insurance capacity is constrained.

“They can also act as incubators for emerging and hard-to-place risks, from cyber underwriting and climate-related exposures to supply chain disruption, supporting innovation in insurance. These outcomes support prudent risk management and risk transfer with positive implications for the wider UK economy,” he told the Airmic delegates.

“For the regime to be internationally competitive and successful, there needs to be proportionality and clarity.”

Getting the balance right 

He acknowledged the PRA will prioritise policyholder protection, particularly where captives expand beyond their original purpose. But he said a balance can be struck by setting clear perimeters that enable captives to meet their core purpose as group risk financing vehicles without “scoring any own goals”. He added: “If we get that balance right, creating a competitive UK proposition can deliver real practical benefits for UK-based companies.”

In terms of the benefits of a captive and its parent being in the UK, he highlighted the advantages of the robust insurance ecosystem available in the London Market – in one time zone. “This enables more efficient use of management time and supports simpler, more effective governance. Combined with the UK's strong reputation for regulatory and legal expertise, that forms a compelling and powerful proposition,” he said.

But he said it will be important clearly to determine what captives can and cannot do, and critically, what they can and cannot insure, he said. “Our approach will be to operate carefully drawn boundaries that meet the core purpose of captives. If we get that right, we can have an internationally competitive, responsive and bespoke regime that doesn't compromise safety, soundness or policyholder protection.”

“Captives incubate emerging and hard-to-place risks, from cyber and climate-related exposures to supply chain, supporting innovation.”

Clear boundaries, simpler rules 

He said the PRA has been listing closely to stakeholders from subject expert groups (SEGs) and working closely with the Financial Conduct Authority (FCA). He suggested a potential move away from Solvency II-based minimum capital requirements towards a simple, factor-based approach for captives.

“They [the SEGs] also discussed taking into consideration the form of that capital and how it can be deployed for it to not be seen as being trapped in the captive,” he said. “And to reduce cost and burden, the SEGs explored proportionate regulatory reporting with consideration for the complexity and scale of each captive.”

He added: “We want a regime that is clear, transparent and easy to navigate for firms. For the regime to be internationally competitive and successful, there needs to be proportionality and clarity, particularly around capital and the role of contingent capital, as well as around governance and reporting requirements.”

He also noted the UK actually has a long history with captives. In the 1920s and 1930s, a number of UK corporates self-insured using onshore entities. While most gradually moved offshore, some survived to more recent times. The first iteration of an employee benefit insurance scheme, run through a form of captive, was also formed in the UK in the 1770s, developed by engineer and manufacturer Matthew Boulton, whose partnership with James Watt led to the revolutionary Boulton and Watt steam engine.

“History tells us that in-house insurance arrangements and risk pooling is a natural complement to the industrial ecosystem, allowing firms to retain and manage risks while supporting investment and innovation. In many ways, the use of captives today is a continuation of that same idea, pairing risk, capital and expertise close to the underlying business.

“Clients have choices about where to establish captives, and we recognise that a transparent, cost-effective and proportionate regulatory regime will best support access to the unique advantages of locating in the UK. With the new captives regime expected in 2027, the ambition is to see an onshore pivot, with captives as the modern successors to those early arrangements.”

A fast-learning regime 

He also hinted that the captives regime would develop over time. He said HM Treasury is committed to legislating for protected cell companies (PCCs) to be able to conduct insurance business, potentially opening up a new market for captive users in the UK.

But he also acknowledged the onus is on the regulator to learn fast and get things right. Returning to his football analogy, he said: “We are like a newly qualified cup team, which means we need to be determined to build credibility quickly and to deliver consistently on what we say we’ll do. We’re conscious that the philosophy we bring to captive supervision will matter just as much as the rules themselves.

“The UK has long provided a home for innovative and entrepreneurial insurance expertise and we hope that the proposed regime will further enhance its proposition as an internationally competitive marketplace. But if we get the framework right and work together to make the regime a success, then hopefully, like the World Cup, it’s coming home; captives will be coming home.”

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