Thursday, November 30, 2023

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UK can offer unique captive proposition in right regulatory framework – Julia Graham

Airmic CEO Julia Graham believes the United Kingdom could offer a “unique proposition” for captives if a “proportionate and fit-for-purpose” regulatory environment is developed with long term commitment from the government.

Airmic, the UK’s risk and insurance management association, joined a roundtable meeting organised by the London Market Group and City Minister, Andrew Griffith MP, economic secretary to the Treasury, on 18 September, to discuss the potential introduction of a UK captive regime.

It is Airmic’s position that a UK captive regime should be implemented outside of Solvency II/Solvency UK so a more proportionate approach can be taken.

The LMG believes this can be achieved through secondary legislation to create a new class of ‘captive insurer’ as an additional schedule to the Regulated Activities Order.

Graham said Airmic is encouraged by the enthusiasm of the LMG and Government to explore the practicalities of introducing a captive regime in the UK that would provide Airmic members with another captive domicile option.

“The UK, already a world class (re)insurance centre, has the potential to offer a unique proposition for captive owners, with expert service providers and a trusted strong governance community already in place and a talent pool of professionals with a deep knowledge and experience in all aspects of managing risk and risk financing,” she said.

“However, a proportionate and fit-for-purpose regulatory environment for captives would need to be developed with clear guidance published. Strong captive domiciles benefit from committed governments and regulators that demonstrate they are in the captive business for the long term.

“We look forward to engaging further on this topic with the London Market Group and UK government.”

Graham was joined by Richard Cutcher, in his role as Airmic’s captive ambassador, and several captive owners who are members of the Association, to share their thoughts on the benefits of captive insurance and what a good captive regulatory regime might look like for the UK.

Airmic has an active Captive Special Interest Group, with more than 50 regular participants that own and utilise captives in domiciles all around the world.

Cutcher said Airmic is “always keen” to explore opportunities to widen the pool of solutions and options available to members who own a captive or are considering forming one in the future.

“Airmic members are currently well served by captive domicile options, but the UK, with all the (re)insurance infrastructure and expertise it already has in place, has the opportunity to present something compelling,” he said.

Cutcher said it was important that any new captive environment would be implemented outside of Solvency II, “so captives can be regulated on a more proportionate basis”.

Airmic said it would continue to engage with the London Market Group, City Minister Andrew Griffith MP and Prudential Regulation Authority (PRA) on the initiative.

There is a growing impetus in Europe for more ‘home’ captive domiciling, with France leading the way with new legislation finalised this year and a steady pipeline of new formations materialising.