Khan: UK captive regime 'coming home' with new consultation

Shoib Khan emphasized the clear use case for captives, highlighting their potential to advance the PRA's primary and secondary objectives.

Properly structured, these vehicles can serve as robust risk-financing and risk-management tools, facilitating risk sharing across the system and matching capital more closely to specific risks.

They are expected to drive data improvements across the market and bridge protection gaps where commercial insurance capacity is limited.

Captives can also act as incubators for emerging and hard-to-place risks, including cyber, climate-related exposures, and supply-chain disruption, thereby supporting innovation in the insurance sector.

These outcomes are crucial for prudent risk management and risk transfer, offering positive implications for firms and the broader UK economy.

Khan stressed the need to define a clear perimeter to ensure captives meet their core purpose as group risk financing vehicles, without compromising policyholder protection.

The goal is a regime with a clearly marked field of play, defining what captives can and cannot do, and critically, who they can and cannot insure.

The UK has a long history with captives, with large corporates operating onshore, wholly-owned insurance companies for their own groups from the 1920s.

These early captives focused on long-term resilience and risk management.

While many moved offshore in the 1950s and 60s, the ambition for the new regime, expected in 2027, is an opposite onshore pivot.

The PRA gained powers to amend its rulebook in 2025, enabling a bespoke captive regime.

This followed HM Treasury's consultations and Subject Expert Groups (SEGs) held with the FCA, which expanded the scope of what captives might do, showing clear potential for firms and the broader UK economy.

Birmingham, a city at the heart of the industrial revolution, even hosted one of the world's earliest employee insurance schemes in the 1770s, an early form of captive.