A three-month consultation on the potential for a captive regulatory regime in the United Kingdom has been launched by the UK’s Chancellor of the Exchequer, Rachel Reeves MP.
Speaking in the Chancellor’s Mansion House speech on the evening of 14 November, Reeves confirmed the Treasury was keen to listen to the views of the captive insurance market on the benefits of facilitating a competitive captive regime in the UK.
“Insurance markets are also pivotal in supporting growth,” she said.
“So we are today publishing a consultation on captive insurance… where a new approach could cement the UK’s position as a leading financial services centre.
“And alongside the regulators’ continued efforts, we will consider further steps to improve the UK’s Insurance Linked Securities offer.”
The government has published a link to the consultation, which closes at midnight on 7 February, 2025.
News of the consultation was welcomed by the UK commercial insurance market, particularly by Marsh McLennan and the London Market Group (LMG), which, along with Airmic, has led the lobbying effort to make captives feasible within the largest commercial insurance market in the world.
Caroline Wagstaff, CEO 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.”
France is the obvious poster child for the UK to follow, having almost reached 20 captives since introducing bespoke legislation in 2023.
The UK should have a distinct advantage in offering a more flexible captive regulation since it is now outside the confines of the European Union and Solvency II.
Responses to the consultation and the subsequent appetite amongst government and the regulator to provide a substantially more proportional environment will be key to its success.
Julia Graham, CEO of AIRMIC, which has helped organise meetings between captive owners, the Treasury and regulators, said: “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.”
Chris Lay, CEO of Marsh McLennan UK, who has been a vocal supporter of a potential UK captive regime said: “This is an important step forward to help the UK’s world leading insurance market become an important home for captive insurers.”
“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.”
The LMG added that it thanks the HM Treasury and is “grateful” for the support of the Chancellor and Tulip Siddiq MP, the Economic Secretary to the Treasury and City Minister.