The UK government is preparing to announce changes to its regulatory framework for captive insurance, with the aim of developing a new market that could contribute billions of pounds to the financial sector.
Chancellor of the Exchequer Rachel Reeves (pictured above) is expected to outline the plans during or around her Mansion House speech on July 15, according to individuals familiar with the process. The announcement would follow a consultation launched by the government in 2023 focused on the viability of a UK-based captive insurance regime.
The UK currently lacks a competitive regime for captives, and supporters of reform argue that regulatory constraints under Solvency II have contributed to business moving to jurisdictions such as Bermuda and Guernsey.
The London Market Group has been one of the leading proponents for reform. It has worked with the Treasury since at least 2022 to advocate for a UK-based captive regime, citing the need to reverse the outflow of captive formations to offshore jurisdictions.
A Treasury spokesperson said the government is consulting on the future of the captive insurance sector to better support growth and international competitiveness, as per Bloomberg.
While final proposals are still being developed and the timing of the announcement could shift, industry participants have continued to press for regulatory change.
Several countries, including the United States, France and Italy, have already implemented onshore frameworks to retain and attract captive business. Lay said any new UK regime would need to be built with appropriate and proportionate regulation and capital requirements.
In November, Treasury initiated a formal consultation on the future of captive insurance regulation. The consultation focused on how a new approach could support the competitiveness of the UK’s insurance sector, and it sought responses from industry stakeholders on areas such as authorisation processes, capital adequacy, and governance requirements.
David Hogg, managing director at Aon, said he hoped any updated rules would support the formation of new captives by UK-based organisations.
Hogg also said that the industry should hope to attract “existing captives from other jurisdictions outside of the UK to consider redomiciling to here.”
The potential scale of the market is a key factor driving the UK’s renewed interest. According to recent forecasts, the global captive insurance market is expected to expand from US$159.15 billion in 2024 to US$250 billion by 2032, with growth attributed to increasing corporate demand for bespoke risk solutions.
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