Captives “a lost opportunity” for London

31-01-2022

Captives “a lost opportunity” for London

The captives market is a great opportunity for the UK but requires regulators that understand the sector, London Market Group CEO Caroline Wagstaff told the House of Lords last week.

“There is a lost opportunity with captives,” Wagstaff said, giving evidence to the House of Lords’ inquiry into insurance regulation. “[W]e could learn from other markets and regulators, but we do not feel that any of it is really seen on a day-to-day level when we look at how the regulators are behaving.”

Giving evidence to the committee on last Tuesday, Wagstaff commented on the largely untapped opportunity.

“It would be great to have a UK captives market. It is a $64 billion market,” she added. The UK’s well-regulated market was an increasing advantage as companies became more concerned about the reputational impacts of where their captives were domiciled.

“The UK ticks a lot of boxes for that,” she said. “It also ticks boxes because people have their HQ here, they can share services, and lots of captive management expertise sits in London.”

However, when captives are asked what they need, they often say regulators that understand their type of risk, she added.

“That is not just about the UK; it is about regulators generally,” she added. “For example, Ireland looks great on paper, but the captive managers who are actually in Dublin have said, ‘It’s quite hard to deal with the regulators. They don’t really understand that we are different.’”

For similar reasons, while UK public bodies such as TfL and the Corporation of London have captives, these are offshore. “They are not in the UK. That seems a bit daft. We want to solve the problem.”

Wagstaff’s comments were supported by Christopher Croft, chief executive of London & International Insurance Brokers’ Association.

“The good news about ILS and captives is that the expertise to structure those deals tends to sit in London, and they tend to be deals that are driven out of London broking firms. It is then slightly frustrating that, because of the nature of the regulatory framework, we are not placing those deals in London as well, and there is a reduced contribution to the UK economy as a result,” he told the committee.

The inquiry continues and contributors can submit evidence until 11 February 2022.

captives market, regulators, London Market Group, insurance, reinsurance, Caroline Wagstaff , Christopher Croft

Captive International