Shoib Khan, director of insurance supervision at the Bank of England, said that the PRA is working on establishing a self-insured system in the UK, aiming to reverse decades of offshore migration trends, and plans to allow self-insured people to finally “return” to the UK in 2027.
A captive insurance company is a wholly-owned insurance company established by an enterprise to protect its own risks, providing specialized forms of self-insurance and risk financing within the group structure.
Speaking at Airmic’s annual conference in Birmingham, Khan outlined plans for the UK’s new captive insurance system, highlighting their importance and the approach the UK needs to take to return to its historic homeland by 2027.
“When the PRA attended the original roundtable hosted by city ministers in September 2023, industry demands for captives were in their infancy and we were in the early stages of thinking about what the UK captive system might most usefully look like,” Khan said in his opening remarks.
He continued: “In 2025, the PRA was given the power to amend the relevant rules in its rulebook, providing us with the means to create a bespoke capture regime.
“The scope of possible actions by captives has been expanded significantly through HM Treasury’s own consultation paper and the subject matter expert groups (SEGs) we have convened in partnership with the FCA.
“These use cases show clear potential for companies seeking to access additional risk financing tools, whilst benefiting the UK insurance industry and economy more broadly and, as I will explain below, advancing our own regulatory objectives.”
Khan said the latest evolution of the British captive regime was not without precedent and that Britain had a long history of prisoner issues.
The executive observed that from the 1920s to the 1930s, many large British companies operated wholly owned insurance companies within the country to underwrite risks for their own groups.
The vehicles reportedly underwrite everything from chemical and pharmaceutical risks, to shipping, energy and mining, to large industrial risks.
“In many ways, they were early captives, integrated into the businesses they served, closely associated with risk management, and focused on long-term resilience rather than short-term profits. While some of them eventually moved to offshore residences, one or two survived into more recent times,” Khan explains.
Khan noted that a new captive regime is expected to emerge in 2027, with the aim of seeing a “land-centric” regime, with the captives acting as modern successors to earlier arrangements, choosing the UK as a competitive and credible home.
Khan added: “From our perspective, the purpose of a captive is clear. If properly structured, a captive has the potential to advance the primary and secondary objectives of the PRA.
“They can be powerful risk financing and risk management tools, helping to share risk across the system, more closely matching capital to risk, driving data improvements across markets and bridging protection gaps where commercial insurance capacity is limited.
“They can also support insurance innovation by acting as an incubator for emerging and hard-to-address risks – from cyber and climate-related risks to supply chain disruptions. These outcomes support prudent risk management and risk transfer, with a positive impact on business and the wider UK economy.
“Of course, we need to keep a close eye on the risks to policyholder protection, particularly when captives operate outside their own group beyond their original purpose.
“However, a balance can be struck by setting clear boundaries, allowing the captive to achieve its core purpose as a group risk financing vehicle without having to achieve any of its own objectives. Regardless of whether we have struck the right balance in this regard, we very much welcome your views and feedback in the upcoming consultation.
“If we achieve this balance, creating a uniquely competitive UK proposition can bring real, tangible benefits to UK companies. Having a captive co-located with the group itself can bring tangible advantages: the board, brokers, advisers, frontline insurers and reinsurers all operate in one time zone, with direct access to the unique ecosystem of the London insurance market.
“This enables more efficient use of management time and supports simpler, more effective governance. Coupled with the UK’s strong reputation for regulatory and legal expertise, it makes for a compelling and strong proposition.
Khan continued, “To borrow another football term, the ‘goal’ is to define a regime with clearly marked playing fields: what captives can and cannot do, and, most importantly, who they can and cannot insure. If we get these lines right, we can have an internationally competitive, responsive and bespoke regime without compromising safety and soundness or policyholder protection.”
Khan said the PRA expected to publish a consultation paper in summer 2026, which remained the current working assumption and was expected to be published soon.
He added that while he could not know all the details of the proposals in advance, the PRA had been listening carefully and working closely with the FCA, and engagement with stakeholders and industry experts had produced some clarity.
Khan continued, “First, while the UK regime builds experience and collectively learns lessons, our policy approach will be to carefully draw boundaries to meet the core purposes of captives. We want to create a regime that is clear, transparent and easy for businesses to operate.
“When thinking about our regulatory approach, we have found engagement with external stakeholders very useful. Discussions at our SEGs last year demonstrated that in order for the regime to be competitive and commercially successful, proportionality and clarity are needed – particularly around the role of capital and contingent capital; and governance and reporting requirements.”
Khan said the regime will continue to evolve over time, noting in particular HM Treasury’s commitment to legislating to protect Protected Battery Companies (PCCs) from carrying out insurance operations, which could open up a new market for captives in the UK.
He said: “We will continue to work closely with HM Treasury and intend to consult on bringing PCC into the system once the necessary legislation is in place.”
Khan concluded: “We acknowledge that in some ways we are like a new cup team, which means we need to be determined, build credibility quickly and consistently deliver on what we say we are going to do.
“We realize that the philosophy we bring to exclusive regulation is as important as the rules themselves. Or, to put it another way, like any successful cup team, we need to match technical skills with ambition and a winning mentality.
“We expect the system to be implemented by mid-2027. Just like the pre-match warm-up before kick-off, we want to work with industry and potential captive owners to support potential applicants between now and implementation.
“We recognize that the UK captive system has real long-term potential, particularly as experience accumulates, confidence grows and businesses become more familiar with how to use the captive system effectively within the UK regulatory framework. But we also recognize that the work will not end when the system comes into force. In many ways this is the beginning of the most important phase for businesses, the wider market and for us.
“While I have spent some time discussing the future of captive insurance, it is also worth recalling the rich history I mentioned earlier. The UK has long been a home for innovative and entrepreneurial insurance expertise and we hope that the proposed regime will further strengthen its position as an internationally competitive market.
“So, back to where I started – as I promised at the beginning of my speech – if our framework is right, if we work together to make the regime successful, then, just like the World Cup… it will come home. The captives will come home!”
