The UK’s financial regulators have launched what they described as “Innovative new proposals” to establish the UK as a centre for the global captive insurance market, and the move has been broadly welcomed.

The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are consulting on a “tailored and competitive regulatory framework” which would enable businesses to establish their own captive insurers in the UK.  It will also support economic growth, leverage the UK market’s expertise and cement its position as the location of choice for global insurance and reinsurance.

Echoing the requests from the country’s (re)insurance markets the FCA said the proposals are tailored and proportionate to the specific nature of captive insurance.

Key features of the proposal include:

• A streamlined PRA/FCA authorisation process with a target of 4-6 weeks;
• Excluding captives from Solvency UK and Consumer Duty requirements;
• lower capital and reporting requirements;
• a flexible capital resources framework;
• dedicated PRA supervisory resource;
• specifically tailored FCA conduct requirements including proportionate supervision and reporting.

“The framework includes appropriate safeguards,” It added. “For example, to protect individuals, captives would be able to reinsure, but not insure directly, employee benefits-related policies.”

At present The proposed regime is currently for “single-parent” captives only, which are used to insure or reinsure the risks of the parent company and other companies within its group. We will continue to work closely with HM Treasury and intend to consult on incorporating protected cell companies into the regime once the necessary legislation is in place.

David Bailey, executive director for Prudential Policy at the PRA, said: “This bespoke regime for captives will enhance the UK’s competitive edge in insurance. Ahead of the formal launch in 2027, we are keen to speak to any businesses that could benefit from establishing a UK-based captive.”

Sarah Pritchard, Deputy Chief Executive of the FCA, added: “A competitive captive insurance option in the UK could benefit UK companies and support wider economic growth. Our approach is pragmatic and proportionate, with appropriate safeguards in place.”

The FCA and PRA added the consultation closes on 14 October 2026, and the regime will launch in summer 2027, after considering respondent feedback.

Broking giant Marsh said it  welcomed the consultation. It added the consultation is a significant milestone for the UK insurance market and, if delivered in a competitive and proportionate way, could strengthen the UK’s position as a credible onshore home for captive risk financing.

“Marsh believes a well-designed UK captive framework can help organisations manage risk more effectively, support investment and innovation, and increase resilience at a time when volatility, emerging risks, and capacity constraints continue to challenge many sectors,” It added. “The regulators’ consultation and emphasis on engagement over the coming months signals clear momentum and an intention to build a regime that works in practice.”

James Addington Smith, CEO, Marsh Risk UK, said: “We welcome the continued progress towards a UK captive insurance regime. Over the next three months, we will work closely with government and regulators to help shape a framework that is proportionate, competitive and practical to implement, positioning the UK as a high-quality domicile for captives and delivering meaningful value for clients, and for the wider market.”

The CEO of UK and Ireland risk management association Airmic, Diane Maxwell added: “The detail set out by the PRA and FCA in the consultation reflects many of the priorities that our members have consistently highlighted, and we welcome this important step in establishing a UK captive regime. It is an important tool for businesses looking to manage risks, and for the UK to remain resilient and competitive.”

Caroline Wagstaff, (above pic) CEO of the London Market Group said she was pleased the industry had been listened to.

“I am delighted that the PRA has demonstrably listened to the needs of the captive community in producing this consultation,” she  continued. “It has an ambitious approval timeline which is to be commended and is vital to the UK being a globally competitive regime.”

Cormac Bradley, senior actuarial director at independent financial consultancy Broadstone, said: “The PRA’s consultation marks a new chapter for UK insurance. This is not simply a lighter version of Solvency UK, but a distinct, captive-specific regime built around the realities of financing intra-group risk.

“What stands out is the shift away from formulaic regulation toward a more judgement-based approach. This should mean simpler capital expectations, materially reduced reporting, and faster authorisation. If delivered, it could shape a real UK captive domicile appeal.

“The PRA is drawing clear boundaries around what qualifies as a captive, and firms will need a well-articulated strategy, strong governance, and a clear capital rationale to get comfortable approval.

“For organisations considering a first-wave application, this consultation marks the starter’s gun. Early movers should be able to help define how the regime operates in practice with success depending on solid financial planning and the clarity and credibility of the captive proposition.”