UK government to 'proceed at pace' with captive insurance plans

(The Insurer) - The UK government said on Tuesday that it is looking to "proceed at pace" to implement a captive insurance framework by mid-2027.

In its response to a consultation on a UK captive framework, the government said the Financial Conduct Authority and Prudential Regulation Authority planned to consult on policy proposals in summer 2026.

The government said it received 42 responses from the insurance sector during the consultation, which generally expressed support for the high-level proposals while underlining the need to simplify regulations and reduce capital requirements.

"The government’s view is that a new captive insurance framework will help cement the UK’s position as a leading international jurisdiction for insurance and risk management business," said the consultation response.

"Improving the UK’s captive insurance offering can also support the government’s wider aim to promote growth in the economy, both via expanding the range of insurance services that can be offered in the UK and also by giving businesses in the UK a greater range of risk management options," it added.

The UK government said it will support the PRA and the FCA in consulting on and introducing a comprehensive framework tailored specifically for captive insurers.

The UK insurance sector has long voiced its preference for a bifurcated regulatory approach that would impose less onerous requirements on captive insurers compared to large commercial insurers with third-party risks.

"Detailed rules will be for the regulators to consider and establish. However, the government anticipates that these will include proportionately lower capital and reporting requirements and facilitating faster authorisations for captive insurers," said the response.

Respondents had diverging opinions on the role of captive managers, with some arguing for changes to the current regime (including a simplified authorisation process), while others outlined that a new regime would be useful to align the UK's captive insurance approach with international regimes.

The consultation response confirmed that the establishment of a new regulated activity is not considered necessary to achieve regulation of captive managers.

"The government does not intend to create a bespoke regulatory framework for captive managers, as it considers that the existing regulatory framework for insurance intermediaries is sufficient," it confirmed.

"The government anticipates that the FCA and PRA will consider how that framework can be tailored as they develop the wider regulatory approach."

The majority of respondents sought to extend the regime beyond the scope of the original proposal to permit more types of firms to set up captives, as well as to allow more types of risks to be insured in captive vehicles.

For example, while the proposals originally excluded regulated financial services firms from establishing captives, the government agreed there is a case for allowing this for specific, limited purposes.

The government also published a consultation on Tuesday on potential reforms to its protected cell company framework, following significant support for the inclusion of some form of captive insurance within the UK PCC regime.