Regulators propose UK captive insurance regime

The PRA and FCA have proposed a new regulatory regime for captive insurance, in a move aimed at supporting UK growth and competitiveness.

The regulators said the proposals are designed to establish the UK as a centre for the fast-growing captive insurance market.

Captive insurance allows businesses to manage their own risks through a wholly owned insurance subsidiary.

The PRA and FCA are consulting on a tailored regulatory framework that would allow businesses to establish captive insurers in the UK.

The proposals include a streamlined PRA and FCA authorisation process, with a target of four to six weeks.

The planned regime would also exclude captives from Solvency UK and Consumer Duty requirements, alongside lower capital and reporting requirements.

Other proposed features include a flexible capital resources framework, dedicated PRA supervisory resource, and tailored FCA conduct requirements, including proportionate supervision and reporting.

The regulators said the framework would include safeguards.

Captives would be allowed to reinsure employee benefits-related policies, but not insure them directly, in order to protect individuals.

David Bailey, executive director for prudential policy at the PRA, said: “This bespoke regime for captives will enhance the UK’s competitive edge in insurance.

“Ahead of the formal launch in 2027, we are keen to speak to any businesses that could benefit from establishing a UK-based captive.”

Sarah Pritchard, deputy chief executive of the FCA, said: “A competitive captive insurance option in the UK could benefit UK companies and support wider economic growth. Our approach is pragmatic and proportionate, with appropriate safeguards in place.”

The consultation closes on 14 October 2026.

The regime is expected to launch in summer 2027, after respondent feedback has been considered.

Aon issued comments welcoming the regulatory proposals.

Leon Walker, EMEA captives leader for Aon, said: “These proposals are a significant milestone in establishing the UK as a competitive and credible captive domicile.

“Captives have now evolved well beyond a response to challenging insurance markets, they are increasingly recognised as strategic tools that help organisations manage risk efficiently, access reinsurance markets, optimise capital and build long-term resilience.

“The emergence of a UK framework has the potential to provide businesses with greater flexibility over where and how they deploy captive solutions. This increased choice is positive as it will allow businesses to select the structure and domicile that best supports their strategic objectives, while reinforcing the UK’s position as a leading centre for insurance and risk innovation.

“When the deep pool of expertise and talent across UK regional markets is combined with the unique strength of Lloyds and the London Market ecosystem, the introduction of a UK regime has the potential to unlock an exciting opportunity for both the sector, and the clients it serves. We also see this as a catalyst to attract more talented professionals into captive management roles, which increasingly sit at the intersection of risk, capital, and strategy.

“We are particularly pleased to see how the regulator has focused on proportionality and clarity. We look forward to engaging constructively throughout the consultation process, including seeking further clarity on areas such as business mix requirements and the treatment of clients with existing captives that are looking to redomicile to the UK alongside the UK’s separate corporate migration proposal.”