UK Chancellor commits to captive consultation

The London Market Group (LMG) and others have welcomed an announcement by Rachel Reeves, Chancellor of the Exchequer that HM Treasury will consult on a UK regime for captive insurance companies. 

In her first Mansion House speech as Chancellor, Reeves said that the UK’s status as a global financial centre cannot be taken for granted. She added that the government is also consulting on introducing a new framework for UK-based captive insurance companies to make the UK insurance market a more attractive hub for businesses seeking efficient risk solutions.

The announcement follows a campaign led by the LMG advocating for a dedicated and proportionate regulatory regime for captives. Over recent months, the LMG has been in discussions with HM Treasury, the Prudential Regulation Authority and Financial Conduct Authority over how the proposed regime might be shaped.

Caroline Wagstaff, chief executive of the LMG said: “If London is to retain its position as a global centre for risk transfer, it needs to be able to offer all the tools in the toolkit; captives are an increasingly important part of that mix. This is a rapidly growing global industry, with captive premium estimated to reach US$161 billion by 2030, and other jurisdictions – including France and more recently Italy - are opening their doors.

“It is vital that the Government hears directly from UK plc, captive owners, managers, brokers and insurers – as well as businesses who may not have considered a captive before, about what they need to help make a UK market thrive. We will be working to ensure that this consultation delivers what the government needs in terms of depth and breadth of response.”

Chris Lay, chief executive of Marsh McLennan UK, said: “This is an important step forward to help the UK’s world leading insurance market become an important home for captive insurers.”

He added: “The regulatory regime must be developed to allow a UK captive regime to compete on the international stage.  Establishing a proportionate and competitive UK captive framework could deliver a major boost to the UK insurance market, demonstrating our innovation and signalling we are open for business.”

Julia Graham, chief executive of AIRMIC, also commented: “Captives are taking centre stage as part of the established and long-term risk financing strategies of many important commercial organisations.  In a context of complex challenges, the London insurance market retains a leading global position with an envious world class reputation.  As part of this position, captives should play a mainstream role and in support of this, the UK should have a proportionate regulatory regime for captives.”          

The LMG stressed that a UK captive domicile would offer the UK the ability to build resilience and risk management here at home, while benefitting from an extensive financial services ecosystem; London-based global brokers with extensive captive consulting experience, an unrivalled range of local banking and asset management options and the world’s largest and most sophisticated reinsurance market.

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