Risk advisory, insurance broking and reinsurance services company Marsh welcomes the recently announced consultation by the Financial Conduct Authority and the Prudential Regulation Authority on the introduction of a UK captive insurance regime.
“This consultation is an important milestone for the UK insurance market and, if conducted in a competitive and proportionate manner, could strengthen the UK’s position as a reliable onshore institution for the financing of captive risk,” the broker said in a statement.
Marsh stressed that consultation and engagement with regulators over the coming months would provide continued, clear momentum for a workable regime.
The broker claims that a well-designed UK captive framework can help organizations manage risk more effectively, support investment and innovation, and build resilience to volatility, emerging risks and capacity constraints.
Marsh remains optimistic about the steps and forecast outcomes proposed in the consultation. In particular, the proposals point to a viable model that would allow captives to combine direct insurance and reinsurance activities within a single legal entity, avoid blanket restrictions on ownership of specific sectors, and allow for the use of mandatory category fronting where appropriate.
The broker said, “The consultation also suggests that protected cell companies remain part of the longer-term ambition, alongside a simpler and more proportionate approach to capital and solvency, recognizing the specific risk profile of many captive structures. Continued efforts to accommodate joint venture and owner-controlled arrangements are also positive, as these models will be important to groups exploring shared or collaborative risk financing approaches.”
However, Marsh values clarity and foresees the need for further refinement. Particularly in relation to the scope of international employee benefit arrangements, the practicality of some regulatory frameworks and the ownership thresholds required to qualify for certain structures (particularly joint ventures).
Regarding relocation, Marsh noted that while a reliable route for overseas captives to move to the UK could enhance the country’s appeal, implementation details were not entirely clear at present and new entrants may need to plan registration and licensing steps in the short term.
James Addington Smith, chief executive of Marsh Risk UK, commented: “We welcome continued progress on the UK’s captive insurance regime. Over the next three months, we will work closely with the government and regulators to help develop a proportionate, competitive and practical framework that positions the UK as a location for high-quality captive insurance and delivers meaningful value to customers and the wider market.”
