The UK government is considering a regulatory overhaul of captive insurance, a form of self-insurance often used by large companies, in a bid to attract more businesses and bolster the nation’s economy. This move, highlighted in a recent consultation document, aims to make the UK a more attractive hub for captive insurance companies.
“The UK’s insurance market is globally significant. The Government wants to support the growth and international competitiveness of the UK’s insurance sector. In doing so, it aims to strengthen the sector’s contribution to the UK economy and bolster the UK insurance industry’s international competitiveness,” the Treasury consultation document stated.
“[Captive insurance] is a fast-growing global market, but most captives are not established in the UK. The Government has received representations from some parts of industry calling for a new approach for the regulation of captive insurance companies in the UK.”
The government’s objective is to create a regulatory environment that encourages captive insurers while maintaining the UK’s reputation as a robust and competitive insurance centre. The consultation document outlines potential changes, including lower capital requirements, reduced application fees, a faster authorisation process, and reduced ongoing reporting requirements for captive insurers.
Industry experts have expressed support for the government’s initiative. “It is good to see the Government asking for input from the insurance industry on changes to the regulatory approach for captive insurers,” said Kathryn Moore, non-life chief actuary at Broadstone. “It makes sense to review the regulatory requirements in line with the associated risks, as is already in place in other jurisdictions. I look forward to following the proposals which should lead to growth in the number of captives established in the UK.”
Krish Kistnassamy, head of general insurance at Hymans Robertson, also commented on the potential benefits of the proposed changes. “The UK has a depth of underwriting, claims, administration, investment, broking, legal and actuarial expertise that already do work on insurance linked securities (ILS) or captives,” Kistnassamy said. “Making it easier to set up ISPVs or captives in the UK will allow a greater share of the fees for setting up and administering those vehicles to remain here and could support innovation, for example in the casualty or cyber ILS space in general insurance.”
The government’s consultation on captive insurance is open until midnight on February 7, 2025. Following the consultation period, the government will review the responses and decide on next steps.
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