It is important the United Kingdom’s commercial market respects captives as “a really good friend” rather than simply an “acquaintance” if a domestic regulatory regime is to succeed, according to Chris Lay, CEO of Marsh McLennan UK.
The UK Treasury announced on 15 July that the country’s insurance regulator – the PRA – had been instructed to design a “competitive and bespoke” supervisory regime for captives with the aim of implemented by mid-2027.
Lay was speaking on a panel titled London Market meets Captives – Friend or Foe? at the UK Captive Briefing, hosted by Captive Intelligence in London today.
Speaking alongside him were Rob Kemp, CEO – Commercial Risk at Aon UK, Angela Iannetta, group head of risk & insurance at BAT, HDI Global’s chief distribution officer Oliver Davies, and Caroline Wagstaff, CEO of the London Market Group.
Panellists primarily discussed whether captives will be welcomed as a complementary addition to the commercial market or seen as a threat that takes premium and business away.
“I’m in the friend camp when it comes to friend or foe, but the real question is, how big a friend?” Lay said. “Is it your close mate, or the person you send a Christmas card to once a year?”
Lay was one of the early advocates of a UK captive regime and one of the first to have discussions with Treasury on the topic. He is eager to see a captive ecosystem succeed and developed for the long term, rather than be a passing fad which is forgotten about.
“The UK has got 350 years of insurance supremacy and excellence, and probably 50 to 60 years of captive inadequacy,” Lay said. “Something was not connecting there for me.”
He added that while it may be tempting to celebrate because the government has consulted industry and agreed to introduce a captive framework, a victory lap would be premature.
“But we’ve seen that happen before – ILS might be a good example. People ask, what happened?”
Lay believes the amount of effort and work put into maintaining a close relationship is very different from how we relate to those we only connect with once in a blue moon, and that commitment will needed to keep the momentum going for captives in the UK.
“I think our challenge is not just friend or foe, but rather, a really good friend or just an acquaintance,” he explained.
He added that captives can sometimes be “polarising” and education will be key to overcome this.
“Particularly around what insurance a captive is going to write and what insurance will be written by someone else,” Lay said. “There’s a massive education piece needed to understand why.
“There are multiple reasons why people might want to use a captive as part of their overall strategy. I think there’s still more work to do from an education point of view.”
Robert Kemp, CEO of Commercial Risk at Aon UK, said there is an important role that needs to be played by brokers to demystify the use of captives in the UK.
“There are probably three or four things to consider, especially as we move away from London into the middle market or regional marketplace, where there’s generally less familiarity,” he said.
“Even though the same needs, requirements, and complexities in client profiles and portfolios still exist, there’s often a perception that captives are complex.”
Kemp said it is important that the barriers to entry are broken down for those who may want to utilise captives.
“There’s also a sense that, typically, brokers may be less familiar with captives and therefore less able or confident to recommend something they do not fully understand,” he said.