UK Government Confirms Captive Insurance Framework Following Consultation

The UK government has confirmed its intention to introduce a new captive insurance framework, following the conclusion of its recent consultation on the matter. 

Chancellor Rachel Reeves unveiled the consultation for a new framework around captives in her speech at Mansion House in November 2024. 

The consultation received 42 responses, primarily from insurance industry stakeholders, including trade associations, insurers, and insurance brokers. 

This week, the government stated that "following careful consideration of the consultation responses, the government, working closely with the financial regulators, intends to proceed with the introduction of a new UK captive insurance framework." 

It added that detailed regulatory rules will be developed by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA), including proportionately lower capital and reporting requirements, and faster authorizations for captive insurers. These changes will be implemented without the need for new legislation. 

As previously reported by Captive.com, the London Market Group (LMG) has estimated that the reshoring of captive insurance companies could bring £153 million in economic value to the United Kingdom, helping fill a gap in London's specialist insurance market.  

While the government does not plan to create a separate regulatory regime for captive managers, it believes the existing framework for insurance intermediaries is sufficient. The FCA and PRA will explore how that regime can be tailored to support the new approach. 

In addition, the government said it may expand access to captive insurance arrangements for smaller companies, including those without the scale or resources to establish a standalone captive. These firms may instead utilize protected cell company (PCC) structures. The government intends to consult separately on the introduction of PCCs. 

It stated, "The government's view is that a new captive insurance framework will help cement the United Kingdom's position as a leading international jurisdiction for insurance and risk management business. 

"Improving the United Kingdom's captive insurance offering can also support the government's wider aim to promote growth in the economy, both by expanding the range of insurance services offered in the United Kingdom and by giving businesses a greater range of risk management options." 

The government emphasized its commitment to moving quickly, with the PRA expected to consult on new rules in summer 2026, aiming for implementation by mid-2027. The FCA's proposals will be developed and consulted on in parallel. 

Strengthening the United Kingdom's Position 

The proposed framework is expected to provide UK corporates with new options for strategic risk retention and support the return of captive business that might otherwise remain offshore. It also positions the United Kingdom to compete with jurisdictions such as France and Italy, which have recently expanded their onshore captive regimes. 

Industry groups welcomed the announcement. The LMG said the new UK regime "will deliver an important risk management tool for United Kingdom and international public limited companies, as well as reinforcing London's position as the global centre for risk transfer and insurance." 

Sean McGovern, chair of the LMG, commented, "If London is to retain its position as a global centre for risk transfer, it needs to be able to offer all the tools in the toolkit. This announcement is clear evidence of the government recognising the London market's role as a contributor to growth and delivering on commitments to support the industry as we continue to enhance the market's world-leading position. 

"British companies and public sector institutions now need to join us in encouraging the regulators to move at pace to establish an attractive and dynamic UK captive regime so they grasp the opportunities offered by the announcement today with both hands." 

Chris Jones, chief executive of the International Underwriting Association (IUA), called the framework a "tremendous opportunity for the United Kingdom to become a leading domicile for captive insurance companies." He noted the United Kingdom's insurance expertise and broad financial ecosystem as foundational strengths. 

"A clear and predictable regulatory regime will enhance investor trust, encourage inward investment, and help create more high-paying specialised jobs," Mr. Jones added. "In order to be successful, it must also be actively promoted, with responsive, cost-effective supervision that minimises market barriers to entry." 

Christopher Croft, chief executive of the London and International Insurance Brokers Association, welcomed the announcement as a valuable alternative for member firms seeking optimal risk management outcomes for clients. 

"This should consolidate London's position as the risk management capital of the world by ensuring all necessary solutions are achievable here," Mr. Croft said. "But, as previous experience has shown, the regime will only deliver success if the technical framework is complemented by a culture within the regulators focused on making it work. We look forward to working with the FCA and PRA to ensure this." 

The announcement follows sustained advocacy by the LMG and others—including brokers, captive owners, advisers, and insurers—for a dedicated and proportionate captive regime. The LMG has engaged in multiyear discussions with HM Treasury, the PRA, and the FCA regarding the proposed framework. 

Stephen Cross, head of strategy and innovation at McGill and Partners, called the move "an exciting and important step forward for the UK insurance market." 

"With a strong captive insurance framework in place, the United Kingdom is in a prime position to potentially become the world's leading insurance domicile for captives over the next decade," Mr. Cross said. "It's a smart move that will attract investment, create jobs, and strengthen national resilience in our post-Brexit economy. As part of this new chapter, we are carefully reviewing the legislation to determine optimal strategies for organizations to benefit from this new captive insurance regime—and stand ready to support our clients."