UK Regulators Propose a Lighter-Touch Framework to Attract Captive Insurers

UK regulators have set out proposals for a new, proportionate framework designed to attract captive insurers to Britain, a market segment the country currently lacks. A captive is a form of self-insurance in which a business uses a regulated insurance subsidiary to finance its own risks from internal resources rather than paying premiums to a third-party insurer. The proposals would create a lighter-touch conduct and prudential regime for single-parent, or pure, captives, which insure or reinsure the risks of their parent company and other firms within the same group. Key features include a streamlined joint authorisation process by the Prudential Regulation Authority and the Financial Conduct Authority with a target turnaround of four to six weeks, exclusion of captives from the full Solvency UK and Consumer Duty requirements, and lower capital and reporting obligations with a more flexible approach to capital resources. Officials argue that establishing a domestic captive regime could keep more risk-financing activity onshore, support the competitiveness of the UK insurance market and give large corporates a more efficient way to manage their own risks.