UK captive insurance plans move closer to launch
Plans to establish a new captive insurance regime in the UK are taking shape, with regulators proposing a more flexible and proportionate framework designed to attract businesses that currently use overseas domiciles.
In a new market segment report, AM Best says a recently published consultation on a bespoke regulatory framework for single-parent insurance captives could create a regime capable of competing with established captive insurance centres.
The proposals, published jointly by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA), are intended to make the UK a more attractive location for companies seeking to insure or reinsure their own risks. Captives are typically wholly owned insurance subsidiaries used by businesses to manage insurance costs, access reinsurance markets and obtain cover for risks that can be expensive or difficult to place in the conventional market.
The UK currently has no captive insurers established under a dedicated regime, meaning many British companies establish captives overseas. The regulators believe a tailored framework could encourage businesses to establish or relocate captives in the UK, supporting the wider competitiveness of the country's insurance market.
A central feature of the proposals is a separate regime outside Solvency UK, with lower capital and reporting requirements reflecting the generally lower risks posed by captives. The framework would also provide greater flexibility over capital resources and a faster authorisation process, with the PRA targeting decisions within four to six weeks for complete applications.
The initial regime would cover single-parent, or ‘pure’, captives, which insure or reinsure risks within their corporate group and certain connected entities. The regulators intend to consider expanding the framework later, including to protected cell company (PCC) structures, which could make captive insurance more accessible to smaller businesses.
The FCA also proposes proportionate conduct requirements, while safeguards would remain in place. For example, captives would be able to reinsure employee-benefit risks but would not generally be permitted to insure those risks directly.
The consultation runs until 14 October 2026, with the new regime expected to launch in summer 2027 following consideration of industry feedback.
AM Best's assessment points to a potentially significant shift in the UK's insurance landscape as regulators seek to combine London's established insurance expertise with a captive framework intended to be competitive, flexible and proportionate.
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