UK Government confirms plans for captive insurance regime
In the wake of a consultation on the creation of a captive regime in the UK, the UK Government, working closely with the financial regulators, has announced that it intends to proceed with the introduction of a new UK captive insurance framework.
The government’s view is that a new captive insurance framework will help cement the UK’s position as a leading international jurisdiction for insurance and risk management business. Improving the UK’s captive insurance offering can also support the government’s wider aim to promote growth in the economy, both via expanding the range of insurance services that can be offered in the UK and also by giving businesses in the UK a greater range of risk management options.
In a statement released on the UK Treasury’s website ahead of Chancellor Rachel Reeves’ Mansion House speech the UK government said that it is: “committed to establishing a genuinely competitive, bespoke captive insurance framework in the UK, and to do so in a way that balances speed of implementation with quality. To achieve this, the government will support the PRA and FCA in consulting on and introducing a comprehensive framework tailored specifically for captive insurers. The PRA and FCA will design this framework in line with their statutory objectives, including giving due consideration to their secondary growth and competitiveness objectives.
“The government also acknowledges and agrees with the feedback from the majority of insurance sector respondents, who called for a broader scope than originally proposed—specifically, to allow a wider range of firms to establish captives and to permit a broader set of risks to be insured through them.”
The UK Government added that detailed rules will be for the regulators to consider and establish. However, the government anticipates that these will include proportionately lower capital and reporting requirements and facilitating faster authorisations for captive insurers. The government’s view is that these changes do not require new legislation.
The government does not intend to create a bespoke regulatory framework for captive managers, as it considers that the existing regulatory framework for insurance intermediaries is sufficient. The government anticipates that the FCA and PRA will consider how that framework can be tailored as they develop the wider regulatory approach.
The government also sees the case for broadening the range of companies who may be able to benefit from captive insurance arrangements. This could include smaller companies who may not wish, or have the means, to establish a standalone captive insurer, but who may prefer to establish a captive through a Protected Cell Company (PCC).
Finally, the UK Government stated that it: “is determined to proceed at pace. The government understands that the PRA and FCA are developing policy proposals on captive insurance. The PRA intend to consult on new rules in summer 2026, with a view to implementing the new framework in mid-2027. The FCA’s proposals will be developed and consulted on in parallel. The government will work closely with the PRA and FCA on these reforms.”
The London Market Group (LMG) has welcomed the announcement, saying that it is confident that a UK regime will deliver an important risk management tool for UK and international plcs, as well as reinforcing London’s position as the global centre for risk transfer and insurance.
The announcement follows a campaign, led by the LMG but supported by brokers, captive owners and advisers and insurers, advocating for a dedicated and proportionate regulatory regime for captives. Over several years, 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.
Sean McGovern, chair 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. This announcement is clear evidence of the government recognising the London Market’s role as a contributor to growth and delivering on commitments to support the industry as we continue to enhance the market’s world-leading position. British companies and public sector institutions now need to join us in encouraging the regulators to move at pace to establish an attractive and dynamic UK captive regime so they grasp the opportunities offered by the announcement today with both hands.
“Captives are taking centre stage as part of the established and long-term risk financing strategies of many important commercial organisations. It is a rapidly growing global industry, with captive premium estimated to reach $161 billion by 2030, and other onshore jurisdictions – including France and more recently Italy, are opening their doors. It is fitting that the UK is part of this growing sector, and critical for the London Insurance market so it can retain a leading global position with an enviable world class reputation.”
Caroline Wagstaff, chief executive of the LMG commented “The announcement of the consultation on protected cell companies is very welcome as this offers real choice for UK companies of all sizes in the use of captives and genuine differentiation. A clear timetable to delivery is also a real plus, it will help everyone to track progress and work at pace to deliver a world-beating regime”.
Christopher Croft, chief executive of the London & International Insurance Brokers Association (LIIBA), commented: “LIIBA welcomes the Chancellor’s announcement that the government is going to progress the work to build a captives regime in UK. This will provide a valuable alternative for our members when seeking the optimal outcome for their clients’ risk management needs. It should also consolidate London’s position as the risk management capital of the world by ensuring all necessary solutions are achievable here. But, as previous experience has shown, the regime will only deliver success if the technical framework is complemented by a culture within the regulators focused on making it work. We look forward to working with FCA and PRA to ensure this.”
The International Underwriting Association (IUA) has also welcomed the announcement of a new regulatory regime for UK captive insurers.
Chris Jones, chief executive of the IUA, said: “There is a tremendous opportunity for the UK to become a leading domicile for captive insurance companies. Both our world-class insurance talent pool and extensive financial ecosystem, in the London Market and nationwide, provide a strong foundation for this initiative.
“A clear and predictable regulatory regime will enhance investor trust, encourage inward investment and help create more high-paying specialised jobs. In order to be successful, it must also be actively promoted, with responsive, cost-effective supervision that minimises market barriers to entry.
“The prospect of a UK captives regime has already generated significant interest, and the IUA looks forward to working with the Government in its promotion.”
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