Lighter regulation needed to attract ‘captive’ insurers to London

Stay informed with free updates

Simply sign up to the UK financial regulation myFT Digest — delivered directly to your inbox.

The UK insurance industry has urged ministers to adopt a light-touch regulatory regime for so-called captive insurance companies to encourage hundreds of businesses to bring these subsidiaries onshore and fill a gap in London’s specialist insurance market.

The push comes ahead of a planned government consultation in early 2024 to design “a new framework for encouraging the establishment and growth of captive insurance companies in the UK” announced in November’s Autumn Statement.

Captives are in-house insurers typically set up by large companies to cover some of their risks, such as property damage. Interest in setting up these businesses is at its highest in decades on the back of a rise in commercial insurance premiums for 24 consecutive quarters, according to brokers.

Research commissioned by trade body the London Market Group found that lighter-touch regulations could see almost 700 captive insurers either moved onshore, from jurisdictions such as Guernsey and Bermuda, or set up in the UK. 

The outcome of the consultation will provide a key test of the commitment of the government and the Bank of England to support the UK financial sector’s competitiveness after Brexit.

Executives argue a new regime would have to be comparable with those in other territories to be successful, which would mean captives would be covered by significantly lighter capital and regulatory requirements than a standalone insurance company.

“There are lots of good reasons why companies would want to come to the UK, but we can’t take it for granted that if we build it, they will come,” said Caroline Wagstaff, London Market Group’s chief executive.

She added said there would be benefits to the insurance sector both in terms of activity — it estimates economic value of £153mn could flow from new UK captives — but also over the long term, by…