
More than 700 captives could be based in UK, say London insurers
More than 700 captive insurers could be formed in the UK or could move onshore from jurisdictions like Bermuda or Guernsey if British authorities adopt a light touch regulatory regime, it has been claimed.
Research commissioned by trade body the London Market Group found that lighter-touch regulations could see almost 700 captive insurers either moved onshore, from jurisdictions such as Guernsey and Bermuda, or set up in the UK.
The Financial Times reported yesterday that the push by the London Market Group comes ahead of a planned government consultation in early 2024 to design “a new framework for encouraging the establishment and growth of captive insurance companies in the UK” announced in November’s Autumn Statement.
The FT said the outcome of the consultation will provide a crucial test of the commitment of the government and the Bank of England to support the UK financial sector’s competitiveness after Brexit.
Executives argue a new regime would have to be comparable with those in other territories to be successful, which would mean captives would be covered by significantly lighter capital and regulatory requirements than a standalone insurance company.
“There are lots of good reasons why companies would want to come to the UK, but we can’t take it for granted that if we build it, they will come,” Caroline Wagstaff, London Market Group’s chief executive told the newspaper.
The LMG estimates economic value of £153 million could flow from new UK captives and it would also fill a critical gap in the UK’s specialist insurance market.
It also argues captives would also benefit as it would mean board meetings and underwriting decisions could be made in the UK.
“If you’re a UK plc, the government is doing something to make your life easier,” Wagstaff added.
Chris Lay, chief executive of the UK arm of insurance broking giant Marsh McLennan, told the FT the current regulatory environment was “preventing the UK from becoming a viable location for captive insurance vehicles”.
The government needed “to show how the UK will be as welcoming for new business as some of the more established captive domiciles”, he said.
The BoE declined to comment to the FT but Sam Woods, chief executive of the Prudential Regulation Authority, has said that the idea of a lighter treatment for captives that hold a single business’s risk was “worth looking at”.
But he cautioned that the regulator “might need a few more staff” if growing a UK captive insurance market became a priority for policymakers.