PRA: UK captive insurance regime vision evolving
The UK’s incoming captive insurance regime is coming into focus despite a lengthy gestation period, according to a fireside chat at the AIRMIC Captive Forum in London.
Julia Graham (pictured right), chief executive of AIRMIC, sat down with Nylesh Shah (pictured right), head of supervision for Lloyd’s and the London market at the Prudential Regulation Authority (PRA), to explore the evolving vision for a UK captive insurance regime.
Shah began by setting out his credentials and the context for his role. With more than a decade at the PRA and a career focused on general insurance — including previous work within the Lloyd’s market and at PwC — he brings both supervisory and commercial experience. Notably, he has advised captives and large corporates on risk management in earlier roles, giving him first-hand exposure to the community now engaging with the PRA.
His current remit covers supervision of Lloyd’s and the wider London market — an arena he described as the most dynamic and innovative segment of general insurance. It is also, crucially, the part of the market where discussions about reintroducing a competitive UK captive regime have gathered pace. As Shah acknowledged, the campaign for reform has been persistent, with industry figures “banging the drum” for years.
Yet the path to reform has not been swift. Addressing frustration over the 18-month development timeline, Shah deployed a memorable analogy: it is “almost as long as an elephant has to wait to deliver a baby”. The reason, he explained, lies in the UK’s highly developed and complex insurance framework. Many rules previously embedded in legislation needed to be separated and relocated into the PRA rulebook to provide the flexibility required for a captive-specific regime. Without that groundwork, any new structure risked being attractive in theory but unworkable in practice.
One of the most significant developments over the past 18 months has been the engagement between the PRA and the captive community. For many within the regulator, this has been their first sustained interaction not just with insurance providers, but with insurance buyers. Shah emphasised how valuable that shift in perspective has been. It has highlighted that designing a regime is only part of the task; equal attention must be paid to delivery, interaction and process.
Traditionally, insurance authorisation involves firms preparing extensive applications before submitting them to the regulator for review. The proposed captive regime, however, may require a more iterative and collaborative model, with early dialogue and shared problem-solving. Shah signalled that the PRA is open to this different dynamic and is actively considering how to resource and structure it effectively.
The six subject expert group meetings convened so far have played a central role in shaping thinking. Drawing participants from across the market — including brokers, insurers and trade bodies — these sessions served two purposes. First, they educated the PRA on contemporary captive usage. Shah admitted that his own early experience of captives dated back to the mortgage indemnity crisis, when building societies rushed to establish them due to lack of market capacity. The modern captive landscape, by contrast, is more sophisticated and strategically embedded within enterprise risk management.
Secondly, the meetings helped identify the attributes a UK regime must possess. Flexibility emerged as a recurring theme. Corporates today use captives not merely as a last resort but as vehicles for risk incubation, employee benefits, and managing emerging exposures where commercial insurance markets may be underdeveloped or absent.
However, flexibility must coexist with the PRA’s statutory objectives, particularly policyholder protection. The alignment of interests within a captive — where the insured and the owner are often the same corporate group — differs markedly from that in traditional insurance models serving individual policyholders. That distinction creates both opportunity and regulatory complexity. Questions around capital requirements, governance, the Senior Managers Regime and potential inclusion of employee benefits all require careful balancing.
Looking ahead, Shah outlined a clear timeline. A consultation paper is expected in the summer, followed by a three-month response period. He urged stakeholders to engage formally: the PRA can act only on evidence. Expressions of support are as important as critiques. Following consultation, a policy statement will finalise the framework, with implementation anticipated in 2027.
What would success look like? Shah described three milestones. First, meaningful and constructive responses to consultation. Secondly, sustained dialogue and expressions of interest between consultation and implementation — a sign that firms are preparing in earnest. Finally, on “day one” of the regime, he hopes to see applicants ready to proceed. While there may be no official prize for being first past the post, early movers would signal market confidence.
International competitiveness also features prominently in the vision. The UK must offer sufficient flexibility and efficiency to stand alongside established domiciles, without engaging in a race to the bottom. Delivery, Shah stressed, will be as important as design.
As Graham observed in closing, only a year ago the prospect of a revitalised UK captive regime felt aspirational. Today, it appears tangible. The journey may be measured in elephantine gestation periods, but the direction of travel is clear: towards a regime that is flexible, responsive and aligned with the evolving needs of sophisticated corporate risk management.
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