The UK has lagged behind many of its insurance market competitors in that it does not have a not have a tailored regime to allow the formation of captive insurers, which has led many corporations to establish their captives overseas, according to UK regulators, who hope to rectify that oversight with their plans to launch a captive insurance regime in July 2027.
Insurance brokers and trade associations have applauded the proposed rules for captives, rolled out yesterday, which have long been on the industry’s wish list to enhance the UK market’s competitive position. While France and Italy opened their doors to captives in 2023, other countries such as Ireland, Malta, Luxembourg, Sweden and Switzerland have long provided captive insurance options.
The UK government’s plan to facilitate captives was first announced in July 2025. Exactly a year later, on July 14, 2026, UK regulators — the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) — laid out their plans to create “internationally competitive UK captive insurance regime.” The regulators have requested an industry consultation that will close on Oct. 14, 2026.
“This bespoke regime for captives will enhance the UK’s competitive edge in insurance,” commented David Bailey, executive director for PRA, in a statement accompanying the announcement. “Ahead of the formal launch in 2027, we are keen to speak to any businesses that could benefit from establishing a UK-based captive.” (The full consultation document can be accessed here).
“A competitive captive insurance option in the UK could benefit UK companies and support wider economic growth. Our approach is pragmatic and proportionate, with appropriate safeguards in place,” said Sarah Pritchard, deputy chief executive of the FCA.
Key features of the proposal include:
- A streamlined PRA/FCA authorization process with a target of 4-6 weeks;
- Excluding captives from Solvency UK and Consumer Duty requirements;
- Lower capital and reporting requirements;
- A flexible capital resources framework;
- Dedicated PRA supervisory resource;
- Specifically tailored FCA conduct requirements including proportionate supervision and reporting.
The proposed regime is currently for “single-parent” captives only, which would be used to insure or reinsure the risks of the parent company and other companies within its group.
Marsh Comments
Insurance broker Marsh welcomed continued progress towards a UK captive insurance regime, which it described as a “significant milestone for the UK insurance market and, if delivered in a competitive and proportionate way, could strengthen the UK’s position as a credible onshore home for captive risk financing.”
“Marsh is encouraged by the direction of travel set out in the consultation and the predicted outcomes,” the broker said in a press release. “In particular, the proposals point towards a workable model that would allow captives to combine direct insurance and reinsurance activity within a single legal entity, avoid blanket restrictions on ownership by particular sectors, and permit the use of fronting for compulsory classes where appropriate.”
“Over the next three months, we will work closely with government and regulators to help shape a framework that is proportionate, competitive and practical to implement, positioning the UK as a high-quality domicile for captives and delivering meaningful value for clients, and for the wider market,” commented James Addington Smith, CEO, Marsh Risk UK.
McGill and Partners
“This is encouraging. The framework shows the PRA has understood what captive owners actually need: proportionate, factor-based capital treatment, a sensible four-to-six-week authorization process, and the flexibility to use parental guarantees and letters of credit,” said Stephen Cross, head of Innovation and Strategy at the broker McGill and Partners, and CEO of McGill and Partners Europe, in emailed comments.
“By removing the complex Solvency II reporting burden and risk margins, the PRA has laid the groundwork for a genuine, competitive onshore alternative,” Cross added.
McGill has been advocating for a competitive UK captive regime for some time, “so it is encouraging to see proposals that move decisively in that direction,” he said.
“If implemented effectively, this framework has the potential to strengthen London’s position as a global center for risk management and create compelling new options for large corporates considering captive solutions,” he continued. “The opportunity is real, now the focus needs to be on ensuring the final rules are sufficiently competitive. We will work closely with our clients to give robust feedback on the consultation.”
LMG and Airmic
Other positive comments came from the London Market Group and the UK’s risk management association, Airmic.
“I am delighted that the PRA has demonstrably listened to the needs of the captive community in producing this consultation. It has an ambitious approval timeline which is to be commended and is vital to the UK being a globally competitive regime,” said Caroline Wagstaff, CEO of the London Market Group (LMG). (LMG is a market-wide body that represents London’s specialist commercial re/insurance and broking communities).
“The detail set out by the PRA and FCA in the consultation reflects many of the priorities that our members have consistently highlighted, and we welcome this important step in establishing a UK captive regime,” said Diane Maxwell, CEO of Airmic, in a statement. “It is an important tool for businesses looking to manage risks, and for the UK to remain resilient and competitive.”
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