UK Regulators Propose New Captive Insurance Regime to Attract Business

The UK's financial regulators have proposed a new framework for captive insurance, a form of self-insurance in which a company uses a regulated insurance subsidiary to finance its own risks rather than paying premiums to a third-party insurer. There are currently no captive insurers established in the UK, and the proposals aim to change that by introducing a proportionate conduct and prudential regime for single-parent captives that insure or reinsure the risks of their parent group. Under the plans, the Prudential Regulation Authority and the Financial Conduct Authority would offer a streamlined authorisation process targeting four to six weeks, exclude captives from certain rules such as the full Solvency UK and Consumer Duty requirements, and apply lower capital and reporting obligations alongside a flexible capital resources framework. Dedicated supervisory resource and tailored conduct requirements would also apply. The consultation, which runs into October, is designed to make the UK a more competitive location for captives, which are commonly domiciled in other jurisdictions. Proponents argue a home-grown regime could keep business and expertise in the UK, while regulators stress the need to balance flexibility with appropriate oversight.