Speech by Reeves Embraced by LMG on Detainees
UK Announces New Captive Insurance Regime to Boost London Market
The United Kingdom is set to establish a new captive insurance regime, aiming to make the country a more attractive destination for captive insurers. The proposed regime, which follows a campaign led by the London Market Group (LMG), promises a tailored regulatory framework that caters to the unique needs of captive insurers.
Key features of the new regime include proportionately lower capital requirements, reduced application and administration fees, faster authorisation processes, and lighter ongoing reporting requirements compared to traditional insurers. The regime will differentiate between direct-writing captives and reinsurance captives, with regulatory requirements set accordingly by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
The LMG, represented by its chair Sean McGovern (also CEO of AXA XL), has long advocated for reforms to reduce the burden of the existing Solvency II capital regime, which has been perceived as restrictive and driving captive insurance business offshore. The new regime is expected to enhance London’s competitiveness internationally, supporting innovation and economic benefits to the UK insurance sector and broader economy.
The proposed regime is anticipated to foster the growth of the UK captive insurance market, currently seen as less attractive compared to offshore centers such as Bermuda and Guernsey. It will support UK businesses in managing risk efficiently, maintaining economic resilience, and retaining insurance-related business within the UK market. The UK captive insurance premium is estimated to reach US$161 billion by 2030, making it a rapidly growing global industry.
Experts from across the global risk transfer value chain attended a roundtable organized by the LMG and City Minister Andrew Griffith to discuss the potential benefits of introducing a UK captive insurance regime. Caroline Wagstaff, CEO of the London Market Group, expressed her pleasure at seeing a more tailored and proportionate approach to regulation being emphasized.
The new regime is expected to benefit UK public limited companies (PLCs) by simplifying operations for groups focused on the UK market with offshore captives. The UK becoming a more accessible domicile for captives under these proposals may lead to better risk management and easier market access for UK-headquartered multinational groups. British companies and public sector institutions are encouraged to join the LMG in encouraging the regulators to move at pace to establish an attractive and dynamic UK captive regime.
In conclusion, the UK’s proposed captive insurance regime simplifies and tailors regulatory requirements to captive insurers’ specific profiles, facilitating quicker market entry and operational efficiencies that should help London and UK PLCs compete globally, attracting and retaining captive insurance businesses within the UK.
[1] London Market Group. (n.d.). UK captive insurance regime. Retrieved from https://www.london-market.co.uk/news-and-insights/news-articles/uk-captive-insurance-regime
[2] The Insurance Insider. (2021, June 24). UK captive insurance regime to be introduced. Retrieved from https://www.insuranceinsider.com/news/europe/3784138/uk-captive-insurance-regime-to-be-introduced
[3] The Actuary. (2021, June 24). UK captive insurance regime to be introduced. Retrieved from https://www.theactuary.com/news/uk-captive-insurance-regime-to-be-introduced/
[4] The London Market Group. (2021, June 24). LMG responds to the announcement of a UK captive insurance regime. Retrieved from https://www.london-market.co.uk/news-and-insights/news-articles/lmg-responds-to-the-announcement-of-a-uk-captive-insurance-regime
- The new captive insurance regime in the UK, being tailored for unique needs of captive insurers, promises to reduce regulatory burden with features like proportionately lower capital requirements and faster authorization processes.
- Reinsurance captives and direct-writing captives will be differentiated under the new regime, with respective regulatory requirements set by the Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA).
- The prospect of a UK captive insurance regime promotes business growth and attracts finance, fostering the retention of insurance-related events within the UK market, as seen with an estimated capture of US$161 billion market share by 2030.
