‘Vital the government hears directly from UK plc:’ Consultation on captive insurance reform launched
The UK government has launched a consultation into a new regime for a captive insurance industry, as a chief executive warns it is vital the government hears directly from UK plc.
Chancellor Rachel Reeve revealed in her Mansion House speech the government was consulting on introducing a new framework for UK-based captive insurance companies.
She stated the plan is to “make the UK insurance market a more attractive hub for businesses seeking efficient risk solutions.”
Captive insurance is a form of self-insurance whereby a company establishes and wholly owns its own insurance coverage.
The idea behind it is that companies have control over the type of policies it needs, while also receiving coverage at a reduced cost compared to traditional insurance.
The captive insurance market has a strong hold in the US and oversea terrorises, but over the last number of years, appetite has increased in Europe.
As Caroline Wagstaff, chief executive of the London Market Group (LMG) said: “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; captives are an increasingly important part of that mix.”
She explained that captive premium estimated to reach $161bn by 2030, with other jurisdictions, including France and more recently Italy, are opening their doors.
While Julia Graham, chief executive of UK-based association AIRMIC stated that “captives are taking centre stage as part of the established and long-term risk financing strategies of many important commercial organisations.”
She noted that the London insurance market retains a leading global position, adding that “captives should play a mainstream role and in support of this, the UK should have a proportionate regulatory regime for captives.”
The previous government under Conservative power stated last November that it would launch a consultation into captive insurance in Spring 2024, but the election was called in May.
Now, the new government has launched the consultation for a regime for captive insurance companies, which it opened to the insurance firms, financial services sector and the business sector.
“It is vital that the Government hears directly from UK plc, captive owners, managers, brokers and insurers – as well as businesses who may not have considered a captive before, about what they need to help make a UK market thrive,” stated Wagstaff.
She added: “We will be working to ensure that this consultation delivers what the government needs in terms of depth and breadth of response”.
The consultation closes on 7 February 2025.