Government announces new UK captive insurance consultation

The government has revealed that it is consulting on introducing a new framework for UK-based captive insurance companies.

A captive is a wholly-owned subsidiary insurer formed to provide risk mitigation services for its parent company or related entities.

The government is considering a new approach to regulating such firms as it looks to make the “UK insurance market a more attractive hub for businesses seeking efficient risk solutions”.

The consultation was unveiled by chancellor Rachel Reeves in her speech at Mansion House yesterday (14 November 2024).

She said: “Insurance markets are also pivotal in supporting growth. 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.”

LMG statement

The announcement was welcomed by the London Market Group (LMG), with it saying that a “UK regime could deliver an important risk management tool for UK and international plcs”.

The group has long been advocating for a dedicated and proportionate regulatory regime for captives and has been in discussions with HM Treasury, the Prudential Regulation Authority and FCA about this.

Caroline Wagstaff, chief executive at 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 $161bn 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”.