Remarks Regarding Reeves'prisoners' Remarks
UK Set to Become a Global Leader in Captive Insurance
The UK government has announced plans to introduce a new regime for captive insurance companies, with the aim of making London a leading insurance domicile for captives over the next decade. This move has been welcomed by industry leaders, who believe that the UK's unique mix of capacity, expertise, and infrastructure could make it a compelling onshore alternative for both UK and international companies.
Rachel Reeves, the Chancellor of the Exchequer, made the announcement, stating that HM Treasury will move ahead with the introduction of the new regime. The London Market Group (LMG) has expressed its support for this decision, with Christopher Croft, Chief Executive of LIIBA, welcoming the government's plan to progress the work to build a captives regime in the UK.
The success of the new regime depends on several key factors. First and foremost is the effective implementation of the new domestic regulatory framework. The UK government has promised greater flexibility, simplified compliance, reduced capital requirements, and streamlined reporting. Delivering this framework with regulatory clarity and international standards alignment is critical.
The regime is also aiming to be accessible and less burdensome than traditional jurisdictions. A "lighter-touch" approach that balances appropriate risk-based regulation with ease of setting up captives will help attract multinational groups and domestic enterprises alike. Reducing approval timelines significantly will also support fast-track captives and compete with established domiciles such as Bermuda, Guernsey, and Vermont.
Another important factor is the alignment of regulatory and tax domiciles. The new UK captive framework seeks to reduce tax complexities by better aligning regulatory and tax domiciles, encouraging UK-headquartered multinationals to onshore or expand captive operations.
The UK's strong insurance infrastructure and professional ecosystem are also crucial. Leveraging the UK's strong insurance infrastructure alongside professional service providers—such as bankers, auditors, lawyers, actuaries, and independent directors knowledgeable about captives—is important to offer a comprehensive support system.
To distinguish itself from other domiciles, the UK must create innovative features or benefits tailored for captive owners. This could include unique tax incentives, regulatory flexibility, and reserve treatments. The regime should also be inclusive, supporting a spectrum from multinational corporations to small and mid-sized enterprises to maximize market penetration.
Finally, to remain competitive, the UK needs to address issues related to the loss of passporting rights into the EU for captive insurers, which will influence the attractiveness of the UK to companies with EU operations.
If successful, the captives regime in the UK could consolidate London's position as the risk management capital of the world. Industry leaders such as Stephen Cross, head of strategy and innovation at McGill and Partners, consider this an exciting and important step forward for the UK insurance market. The FCA has also requested work to be undertaken by trade associations on non-financial misconduct, further demonstrating the UK's commitment to maintaining high standards in the insurance industry.
LIIBA looks forward to working with the FCA and PRA to ensure the success of the captives regime. The organisation is optimistic that the new regime will provide an alternative for its members when seeking optimal risk management solutions, potentially attracting investment, creating jobs, and strengthening national resilience in the UK's post-Brexit economy.
[1] HM Treasury (2021). Captive Insurance Regime. [online] Available at: https://www.gov.uk/government/consultations/captive-insurance-regime/captive-insurance-regime
[2] LIIBA (2021). Captive Insurance. [online] Available at: https://www.liiba.co.uk/policy-and-advocacy/policy-areas/captives/
[3] The Actuary (2021). Captive insurance: A new frontier for the UK. [online] Available at: https://www.theactuary.com/insight/features/captive-insurance-a-new-frontier-for-the-uk/
[4] McGill and Partners (2021). Captive Insurance. [online] Available at: https://www.mcgillandpartners.com/services/captive-insurance/
- The UK's unique mixture of capacity, expertise, and infrastructure, along with the promise of simplified compliance, reduced capital requirements, and streamlined reporting, is expected to make the country an attractive onshore alternative for both domestic and international companies seeking specialized insurance, such as captive insurance.
- In order to compete with established domiciles like Bermuda, Guernsey, and Vermont, the new UK captive insurance framework plans to reduce approval timelines significantly, align regulatory and tax domiciles, and offer a comprehensive support system through professional service providers.
- To maintain its competitive edge, the UK needs to create innovative features like unique tax incentives, regulatory flexibility, and reserve treatments that will attract a wide range of captive owners, from multinational corporations to small and mid-sized enterprises, while addressing issues related to passporting rights for EU operations.
