UK regulators propose tailored captive insurance framework
The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are consulting on a new, tailored regulatory framework for captive insurance. The proposals aim to establish the UK as a leading hub for this market, fostering economic growth and leveraging existing expertise.
A bespoke regulatory blueprint
The proposed framework introduces a streamlined PRA and FCA authorisation process, targeting completion within 4-6 weeks.
Captive insurers would be excluded from Solvency UK and Consumer Duty requirements, benefiting from lower capital and reporting obligations.
The regime features a flexible capital resources framework and dedicated PRA supervisory resources, alongside specifically tailored FCA conduct requirements and proportionate supervision.
Appropriate safeguards are included, such as allowing captives to reinsure, but not directly insure, employee benefits-related policies, ensuring protection for individuals while fostering market growth.
This approach aims to make the UK an attractive domicile for businesses seeking to manage their risks through self-owned insurance subsidiaries.
Boosting UK's competitive edge
David Bailey, Executive Director for Prudential Policy at the PRA, stated that this bespoke regime will "enhance the UK's competitive edge in insurance.
" He expressed keenness to engage with businesses interested in establishing a UK-based captive.
Sarah Pritchard, Deputy Chief Executive of the FCA, added that a competitive captive insurance option could "benefit UK companies and support wider economic growth," emphasizing a pragmatic and proportionate approach.
The proposals currently focus on "single-parent" captives, with future plans to consult on incorporating protected cell companies once legislation is in place.