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UK captive insurance: Paving the way for a competitive and innovative market

Developing a regulatory framework that makes the UK more attractive for captive formation, re-domiciliation, and expansion.

29/09/2025 · 3 minute read

The UK insurance market is among the largest and most sophisticated in the world, with London serving as a major hub for complex and specialty risks. Despite its strengths, the UK’s lack of captive insurance regulations places it behind jurisdictions such as Bermuda, Singapore, and France. Additionally, well-established domiciles like Guernsey and the Isle of Man remain popular choices for UK-based organisations seeking captive solutions.

The government’s strategic objectives for developing a captive regime include:

  • Enhancing competitiveness: Developing a regulatory framework that makes the UK more attractive for captive formation, re-domiciliation, and expansion.
  • Supporting economic growth: Facilitating risk management solutions for UK businesses, which can drive job creation, increase professional services, and broaden economic activity.
  • Stability and policyholder protection: Maintaining high standards of oversight to prevent systemic risks and protect policyholders, while avoiding overly burdensome regulation that could stifle market development.
  • Encouraging innovation: Streamlining licensing processes to foster a diverse and inclusive market.

Initiating a captive regime in the UK

In July 2024, Chris Lay, CEO of Marsh McLennan UK & CEO Marsh, and the London Market Group sent an open letter to UK Chancellor Rachel Reeves, calling on her to establish a UK Captive Regime. The Treasury responded in November 2024, when HM Treasury published a consultation document that outlined a potential regulatory regime for captives in the UK, with the overarching aim of enhancing the UK’s competitiveness, supporting economic growth, promoting stability and policyholder protection, and fostering innovation.

Industry responses, including Marsh’s, supported this approach, but emphasised that the rules must be proportionate, competitive, and aligned with the low-risk nature of captives. Marsh believes this means regulations should be scaled appropriately, aiming for a setup time of around three to four months, which is comparable to global standards, with ongoing reporting and oversight tailored to the actual risk profile. Since captives are generally non-systemic, the capital and solvency requirements should reflect their low-risk profile.

Recent developments

In July 2025, HM Treasury published its response to the feedback received on the proposed captive framework. The response was supportive, with HM Treasury confirming its intention to proceed in creating a regime by instructing the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) to develop a detailed regulatory framework.

The PRA has established a captive subject expert group, with Marsh actively participating, to help create a regime that is proportionate, competitive, and flexible. While the initial consultation did not include proposals for protected cell companies (PCCs), a separate consultation is exploring what legislative and regulatory changes are needed to allow for their creation; Marsh will continue to support their integration into the regime.

Although HM Treasury initially outlined certain restrictions — such as excluding financial institutions, life insurance, or compulsory insurance — the feedback from Marsh prompted a more flexible and inclusive approach. HM Treasury has delegated to the PRA the task of assessing which risks are inappropriate for these sectors, encouraging a balanced, risk-based, and proportionate regulatory environment.

The current timeline aims for draft regulations to be available in 2026, with the PRA most likely permitting captive formations to begin in mid-2027. Specific dates are yet to be determined.

Looking ahead

Marsh has a strategic plan to support clients moving forward, promoting their success while aligning with their organisational goals. Part of this plan involves Stuart Herbert, Managing Director and International Captive Consulting Practice Leader, to head Marsh’s captive response team. In addition to offering consulting services, Stuart is a member of the PRA subject expert group actively working with the regulator.

Speak with a Marsh representative

To find out more about Marsh’s approach and client solutions, please fill out the form to be contacted by a captive colleague.

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