If you work in captive insurance you would have to have been hiding under a rock to miss the news the United Kingdom has finally thrown its hat into the royal rumble of captive domiciles this week.
Captive Intelligence has published a variety of reaction and news articles analysing this significant step for the world’s largest and most sophisticated commercial insurance market, but it is instructive to take a look at the relevant numbers that may give us a clue as to how successful a UK domicile could be, where growth could come from and at who’s expense.
The below numbers are taken from Ci DataHub, the premier platform for captive insurance data.
The UK is already a very mature market when it comes to captive utilisation. The corporate community has not required a ‘home’ domicile to become, by some distance, the second largest captive owning country.
There are already 296 UK parent companies that own an active captive today. This is second only to the United States, which has a whopping 2,717 parent companies of captives.
The third most populous captive owning country is France, with 111 captive parents, followed by Japan (109) and Canada (105).
Being a mature market for captive utilisation will have its pros and cons when it comes to growing a UK domicile.
Awareness and penetration is high, so getting the message out to the corporate and risk management community should be easy but there will be fewer low hanging fruits for the captive managers and consultants to harvest.
Any success will ultimately be down to the attractiveness of the regime. There are essentially two avenues for the UK to attract captive formations; re-domestications of existing captives, or totally new formations.
Regarding new formations, we know that a lot of UK companies already have captives but there are still new captives being formed all the time.
Eleven new captives were formed by UK companies in 2024, including a Guernsey vehicle for Jaguar Land Rover, while in 2023 there were six UK-owned captives formed and in 2022 there were eight, including for THG Plc and Experian Plc – again, both opting for Guernsey.
Captive business is rarely fast moving, but this demonstrates a steady pipeline of new UK-owned captives exists and it is reasonable to expect this to be bolstered further by the increased awareness and publicity afforded to captives by the UK entering the fray.
The Guernsey question & UK-favoured captive domiciles
Re-domestications can be a sensitive subject. There is always a winner and a loser.
Luxembourg has had to peer nervously next door as France presses ahead with its ambitions, but the experience to date has seen no raid on the 57 French-owned captives in the domicile.
France, which introduced its own captive framework and an accompanying equalisation reserve in June 2023, now stands at 23 active captives and all but one of these have been new formations.
There has also been four new French-owned captives formed in Luxembourg since 2023, demonstrating the continued appetite for established and expert captive domiciles.
In the UK context, it is undoubtedly Guernsey and the Isle of Man that has the most to lose from a successful destination domicile driven by London and its international reputation.
Guernsey is one of the primary reasons the UK business community has been able to embrace captives to such an extent the past forty years. It has a regulator that is so often ahead of the game on innovation (PCCs and ICCs, as two examples) and a substance-based ecosystem that understands the uniqueness and special status of captives.
When it comes to the UK – Guernsey is synonymous with captives and captives are synonymous with Guernsey.
According to Ci DataHub, 58% of active Guernsey captives are owned by UK organisations, while in reverse, exactly half of the 300 UK-owned captives are domiciled in Guernsey.
That latter metric is re-emphasised when taking just the last five years of captive formations – 50 new UK-owned captives have been formed since 2020 and 66% of those chose Guernsey as its domicile.
The Isle of Man, although home to a more modest 90 active captives, is also largely reliant on the UK for its business – 49% are currently UK-owned.
Whether or not we see a flurry of re-domestications is hard to predict, especially since we do not know how the UK regime will stack up against established incumbents, such as Guernsey and the Isle of Man.
We know there are companies – from very large multinationals to domestic UK infrastructure focused companies – with existing captives in these and other established domiciles that are attracted to the idea of ‘coming home’.
These candidates will only bite the bullet, however, if the framework is well designed and they believe a UK captive regulator is committed to being as nimble and responsive to their needs as to what they are already used to.
If its gunning for re-domestications, the UK will be up against some of the most long-standing captive jurisdictions in the world – Guernsey, Isle of Man, Bermuda and Vermont have more than 200 years of captive regulating experience between them, with their own expert captive infrastructure in already place.
As shown by those four new captives in Luxembourg, there is also the strong possibility that while the UK entering the game may bring new prospects to the fore, having compared the various domicile options, a number of new captives may still opt for one of the established incumbents.
A rising tide lifts all boats and all that.
Industry drivers
Due to the UK’s mature and innovative insurance market, it is unsurprising this sector contributes the largest proportion of captives and this is also in aligned with the global picture.
PCCs and sponsored captives, for example, are commonly owned by brokers, captive managers and insurers which does further skew the numbers towards the insurance sector.
The UK’s professional services sector is another big utiliser of captives, finding particular strategic benefit in using them to support professional indemnity programmes and I am aware of several law firms and other professional groups exploring this opportunity right now.
To what extent the incumbent Labour government is successful in its efforts to accelerate home building, investment in renewable energy infrastructure and utilities may end up influencing the number of captives formed by these sectors in the coming years.
There is no doubt, however, that there remains a strong pipeline of quality new captive candidates which should ensure the success of a UK captive regime is not dependant on re-domestications.
Airmic’s own member survey published in March this year showed that of those respondents that do not currently own a captive, 72% said their organisation is currently exploring the possibility of forming a captive now or in the future.
For more information on the Ci DataHub, contact Nick Morgan or Lucy Kingston to request a demo.