Firms spring into gear as Reeves green lights UK captive insurance regime
Rachel Reeves is set to fire the starting gun on a captive insurance framework in the UK in her Mansion House speech this evening, with sector giant Aon taking advantage of the move with the launch of its own UK-based captive management company.
The Treasury launched a consultation on a new regime for the captive insurance industry last November, which was revealed in Reeves’ previous speech at Mansion House.
Captive insurance is a form of self-insurance in which a company establishes and wholly owns its insurance coverage. Several large companies in the UK already have captives, but these are typically based in other jurisdictions, such as Guernsey and the Isle of Man.
Speaking last year, the Chancellor explained the plan was to “make the UK insurance market a more attractive hub for businesses seeking efficient risk solutions.”
Following a consultation that closed in February, the government revealed it now intends to proceed with the introduction of “a dedicated, competitive framework for captive insurance in the UK”.
Industry reaction
Commenting on the decision, Caroline Wagstaff, CEO of the London Market Group (LMG) said: “A UK captive domicile will offer UK plc the ability to build resilience and risk management here at home, while benefitting from an extensive financial and professional services ecosystem; London-based global brokers with extensive captive consulting experience, an unrivalled range of local banking and asset management options and the world’s largest and most sophisticated reinsurance market.”
Sean McGovern, Chair of the LMG, noted: “It is a rapidly growing global industry, with captive premium estimated to reach $161bn by 2030, and other onshore jurisdictions – including France and more recently Italy- are opening their doors.”
“It is fitting that the UK is part of this growing sector, and critical for the London insurance market so it can retain a leading global position with an enviable world-class reputation,” he added.
Esme Gould, Head of captives at Zurich, said: “The planned framework will make this sophisticated risk management tool accessible to more UK businesses. It’s important that this framework is proportionate and competitive – if it is, we expect to see a steadily growing interest whilst also attracting capital into the UK.”
“Whilst this is a really positive opportunity for the UK economy, it will need to be subject to a proportionate regulatory approach in order to compete with other jurisdictions,” she added.
As a result of today’s news, Aon launched its UK-domiciled captive management company in anticipation of demand for UK-based captives following the speech.
Ciaran Healy, global captives leader at Aon, noted: “The UK is already home to the world’s leading insurance marketplace in London and it’s only natural that it should also be a competing jurisdiction for captives.”
He added: “The UK has the expertise, reputation and drive for innovation that will ensure success – and here at Aon we are already very advanced in our preparation to launch a new UK-based captive management company.”