Rachel Reeves, Chancellor of the Exchequer, has revealed that the government is consulting on introducing a new framework for UK-based captive insurance companies to make the UK insurance market a more attractive hub for firms seeking efficient risk solutions.
In an announcement outlining a package of reforms aimed at solidifying the UK’s position as a “global powerhouse” in financial services, the chancellor stated that the government will prioritise five key growth opportunities to leverage the nation’s existing strengths and maximise its growth potential.
These will reportedly be FinTech, sustainable finance, asset management and wholesale services, insurance and reinsurance, and capital markets. As per the announcement, this new strategy will reflect the idea that the success of the financial services sector is built on strong ties with international partners.
Meanwhile, to deliver more investment in businesses, infrastructure and clean energy, the Chancellor additionally revealed reforms to the pension system and laid the foundations for a “world-leading” sustainable finance regulatory regime.
The London Market Group (LMG) has since released a statement welcoming the news that HM Treasury will consult on a UK regime for captive insurance companies.
“If introduced, a UK regime could deliver an important risk management tool for UK and international plcs, as well as reinforcing London’s position as the global centre for risk transfer and insurance,” LMG said.
Caroline Wagstaff, CEO of the LMG added, “If London is to retain its position as a global centre for risk transfer, it needs to be able to offer all the tools in the toolkit; captives are an increasingly important part of that mix.
“This is a rapidly growing global industry, with captive premium estimated to reach US$161 billion by 2030, and other jurisdictions – including France and more recently Italy – are opening their doors.
“It is vital that the Government hears directly from UK plc, captive owners, managers, brokers and insurers – as well as businesses who may not have considered a captive before, about what they need to help make a UK market thrive.
“We will be working to ensure that this consultation delivers what the government needs in terms of depth and breadth of response”.
Julia Graham, CEO of AIRMIC, commented, “Captives are taking centre stage as part of the established and long-term risk financing strategies of many important commercial organisations.
“In a context of complex challenges, the London insurance market retains a leading global position with an envious world class reputation.
“As part of this position, captives should play a mainstream role and in support of this, the UK should have a proportionate regulatory regime for captives.”
Chris Lay, CEO of Marsh McLennan UK, also said, “This is an important step forward to help the UK’s world leading insurance market become an important home for captive insurers.
“The regulatory regime must be developed to allow a UK captive regime to compete on the international stage.
“Establishing a proportionate and competitive UK captive framework could deliver a major boost to the UK insurance market, demonstrating our innovation and signalling we are open for business.”
