Emma RadmoreHM Treasury is consulting on a possible new approach to captive insurance companies. The market for captive insurance is fast-growing and despite the UK’s world-leading insurance sector, few captives are domiciled in the UK. The Government is looking at whether it can use the freedoms in the Financial Services and Markets Act 2023 to update all assimilated laws post-Brexit, to make the UK a more competitive place for captives to set up. It sees the drawbacks of the UK as a captive location mainly being that they are subject to many of the same requirements in relation to application and compliance as all other insurance companies. It is considering whether any of the following measures would be proportionate from a regulatory and risk-based view, and might encourage greater competitiveness:
- a lower capital requirement;
- reduced fees;
- a faster application process;
- reduced ongoing reporting requirements.
It is also considering whether to differentiate between direct-writing captives and reinsurance captives.
Further, it is considering whether to put in place measures that would:
- exclude regulated firms dealing with financial services and pensions from setting up and passing risks to their own captives;
- exclude captives from writing life insurance and compulsory insurances;
- regulate the third party managers of captives; and
- potentially allow use of the protected cell company framework for use by smaller companies wanting a captive.
Consultation closes on 7 February 2025.