If the UK introduces a competitive captive regime, the jurisdiction has the potential to be a bigger domicile than France, largely due to its robust insurance ecosystem, according to Stephen Massey, insurance tax specialist at Ernst & Young (EY).
There is a general sense of optimism that there will be a positive announcement from Government in relation to the UK implementing a dedicated captive regulatory framework, which is anticipated to come before or at the Chancellor’s Mansion House speech on 15 July.
“In addition to the Lloyd’s of London captive options, it’s important to consider the broader insurance infrastructure that already exists in the London market,” Massey said, speaking on a recent episode of the Global Captive Podcast.
Massey outlined a few scenarios where companies might consider setting up a UK captive.
“Some businesses are almost entirely domestic UK operations, aside from having a captive that’s currently offshore,” he said. “That’s a fairly straightforward case.”
“Then there are multinational companies that already have UK tax-resident captives. That clearly indicates an appetite for a UK-based regime – this represents another key group,” he added.
Massey said there is a broader question of whether the UK wants to attract captives that are currently based in places such as Bermuda.
“Are they looking to compete in that space?” he said. “It’ll be interesting to see, especially considering that the UK initially ruled out offering any tax incentives as part of the consultation.”
Massey said that for the UK captive regime work, the jurisdiction will need a flexible regulatory framework and a “simplified” compliance process.
“That also means having a lower capital requirement than Solvency II and streamlining some of the reporting obligations,” he said.
Massey said there’s a common concern shared by various captive owners over the large volumes of actuarial analysis and paperwork required to meet Solvency II compliance “especially when it’s for what is essentially first-party risk”.
“That’s the kind of burden we’d like to avoid in a UK context,” Massey said.
Captive Intelligence has reported extensively on the plans for a UK captive regime with the London Market Group’s Caroline Wagstaff believing it could become a “destination domicile” should the regulatory rules be appropriate.