Service delivery will determine success of UK captive regime, says IHG’s Marc Bentley
The debate around a potential UK captive insurance regime has gathered pace in recent months, with industry participants closely watching the next steps from regulators.
For Marc Bentley, head of global risk finance at IHG Hotels & Resorts, the introduction of a UK framework would be a positive development, but the long-term success of any regime will depend on far more than tax treatment or capital requirements.
Bentley believes the technical design of a UK captive regime is only part of the challenge. While competitive taxation, capital rules and regulatory requirements are important considerations, he argues these elements are relatively straightforward to benchmark against established captive domiciles. The real differentiator, in his view, will be the quality of service and expertise available to captive owners.
Vermont sets the benchmark
IHG already operates an established captive in Vermont and is likely to add another US-based captive for a specific reason. Given that the company’s operations, hotel footprint and workforce are predominantly located in the US, Bentley does not see a compelling reason for IHG to relocate its existing structures to the UK. Nevertheless, he believes a domestic regime could open opportunities for UK organisations previously reluctant to establish offshore captives.
According to Bentley, the greatest opportunity lies in expanding access and awareness. A UK regime could provide companies with more choice and encourage businesses unfamiliar with captives to explore the model. He points to developments in France as evidence that a well-designed framework can attract participation and deliver meaningful growth.
However, winning over large corporates with mature captive programmes might prove more difficult. For those organisations, the decision will depend less on regulatory design and more on the overall experience provided by the domicile.
That is where Vermont continues to set the benchmark. Bentley is particularly complimentary about the state’s captive regulator, describing its responsiveness, accessibility and engagement as key strengths. In his experience, the regulator takes an active interest in captive owners’ businesses, listens carefully to industry concerns and provides timely answers when issues arise.
He argues that the UK’s greatest challenge will be replicating that level of service. Capital requirements and taxation can be compared across jurisdictions, but creating a respected captive ecosystem requires talented people who want to work within the sector. Vermont, he notes, has succeeded in making roles within the captive industry highly attractive and prestigious. That reputation has helped create a virtuous circle of expertise, responsiveness and trust.
“The question facing the UK is simple: how will it differentiate itself through delivery?”
Making risk more visible
For Bentley, the question facing the UK is simple: how will it differentiate itself through delivery? The answer will determine whether the regime merely exists or genuinely competes with established domiciles.
Alongside his views on the UK market, Bentley has also highlighted the evolution of IHG’s captive strategy. Over the past four to five years, the company has deliberately expanded the role of its captive, bringing more lives and more risks into the structure. As a result, the captive became increasingly visible within the wider organisation.
Interestingly, that growth initially created concern because the consolidated risk profile appeared far larger. Bentley stresses that IHG was not necessarily assuming more risk overall. Instead, risks that had previously existed across different parts of the business were being gathered into a single vehicle, making them easier to see and measure.
The value of diversification
The next phase of the strategy focused on diversification. By combining more than 20 different lines of risk, IHG was able to create a portfolio that resembled a conventional insurance company rather than a collection of isolated exposures. This diversity strengthened discussions with reinsurers and reduced dependence on individual risk categories.
Bentley describes the approach as balancing risks with opposing characteristics. If one exposure increases under certain conditions, another might decrease. He likens the concept to a see-saw, with different risks offsetting one another and creating a form of natural hedge.
One example is “key money”, a common arrangement in the hospitality sector. IHG might provide financial facilities to encourage a hotel owner to convert from a competing brand or unbranded to one of its own brands. The investment is justified by the expected value of the long-term agreement. However, if the hotel underperforms or suffers a major loss shortly after conversion, the anticipated return might never materialise.
By incorporating such specialised exposures within a broader and carefully balanced portfolio, IHG has created a captive strategy that supports growth while maintaining a disciplined approach to risk. The approach also improves transparency, supports capital efficiency and helps align risk financing with business objectives and strategy.
For more news from AIRMIC Today, click here.
Did you get value from this story? Sign up to our free daily newsletters and get stories like this sent straight to your inbox.
