Airmic 2026: PRA sets out vision for UK captive regime ahead of consultation

Risk managers and insurers have been told the UK captive market is “coming home”, as the regulator prepares to launch its much-awaited consultation on a new captive regime.

Speaking in Birmingham at the Airmic annual conference, Shoib Khan, director of insurance supervision at the Prudential Regulation Authority (PRA), said the regulator had listened to the market and was confident that its proposals reflected the demands placed upon it.

“I’m delighted to be here at the Airmic Annual Conference in Birmingham. The chance to speak to you today is timely for two reasons. Firstly, because the PRA plans to shortly issue a consultation paper on our plans for a UK captive regime, and, secondly, because we’re very close to England’s first match in the World Cup. It’s hard to tell which will generate more excitement, but the link between the two will become clear in due course.”

Khan said the regulator and the market had been on a journey to reach the point where the consultation process could begin with more concrete proposals for what a UK captive regime would look like.

“I’ll begin by recapping the journey we’ve been on with captives, since recapping England’s World Cup journey might take too long.

“When the PRA attended the original roundtable hosted by the City Minister in September 2023, the industry ask on captives was in its infancy, and we were at the early stages of thinking about what the UK captive regime could most usefully look like. In 2025, the PRA gained the powers to amend the relevant rules in its rulebook, giving us the means to create a bespoke captive regime. Fast forward through HM Treasury’s own consultation papers and the Subject Expert Groups (SEGs) we held in collaboration with the FCA, and the scope on what captives might do has expanded significantly. The use cases show clear potential for firms seeking to access additional risk-financing vehicles, while benefiting the UK insurance industry and economy more broadly and, advancing our own regulatory objectives.”

A long history of risk financing

Khan said UK businesses had sought to create their own internal risk mitigation schemes since the 1700s, acting as precursors to the modern captive regimes now seen across the globe.

“They were established to enhance long-term resilience, not pursuing profit,” Khan added. “They were there for the long term and complex risks well before those terms became popular.”

He said the PRA recognised that captives could be “efficient risk finance and risk management tools”.

“They have the ability to fill the gaps where traditional insurance capacity is strained and can be incubators for ways in which to address new and emerging risks while the market looks to innovate.”

Khan added: “Whether we have struck the right balance in the new proposals will be seen in our consultation paper and we encourage all to have their say.”

He continued: “From our perspective the use case for captives is clear. If properly structured, captives have the potential to advance both the PRA’s primary and secondary objectives. They can be robust risk-financing and risk-management tools, helping to share risk across the system, match capital more closely to risk, drive data improvements across the market, and bridge protection gaps where commercial insurance capacity is constrained. They can also act as incubators for emerging and hard-to-place risks – from cyber and climate-related exposure to supply-chain disruption – supporting innovation in insurance. These outcomes support prudent risk management and risk transfer, with positive implications for firms and the wider UK economy.

“Of course, we need to keep an eye on risks to policyholder protection, particularly where captives expand beyond their original purpose to write business outside of their own group. However, a balance can be struck by setting a clearly defined perimeter that enables captives to meet their core purpose as group risk financing vehicles without scoring any own goals. Whether we have struck the right balance here is an area where we would greatly welcome your input and feedback during our upcoming consultation.

“And if we get that balance right, creating a uniquely competitive UK proposition can deliver real, practical benefits for UK based companies. A captive based in the same location as the group itself brings tangible advantages: boards, brokers, advisers, fronting insurers and reinsurers all operating in a single 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. Combined with the UK’s strong reputation for regulatory and legal expertise, it forms a compelling and powerful proposition.

“The ‘goal’, to borrow another footballing term, is to define a regime with a clearly marked field of play: what captives can and cannot do, and, critically, who they can and cannot insure. If we get those touchlines right, we can have an internationally competitive, responsive and bespoke regime that does not compromise safety and soundness or policyholder protection.”

A call for proportionality

Khan said the PRA had heard the calls for proportionality and clarity around capital, contingent capital, regulation and governance.

“We understand the need to ensure that the capital cannot be seen to be trapped in the captive,” Khan explained. “We are looking at a tailored approach for ongoing oversight.

“We recognise it will continue to develop over time.”

Khan said the future use of protected cell companies was on the regulator’s radar and that, once the necessary legislation is passed for their use in the UK, it would be factored into the captive regime.

“Like a newly qualified World Cup team we need to be determined to build credibility quickly and deliver consistently on what we say we will do. We are conscious that the philosophy we bring to captive supervision will matter just as much as the rules themselves. Or, in other words, like any successful cup team, we need to match technical skill with ambition and a winning mentality.

“We continue to be on track for the regime to come into force in 2027, and we want to support a pipeline of applications, as we head towards that date.

“Our work will not end when the regime goes live, we want to encourage innovation and entrepreneurship for which the UK and London market are famous.

“If we get the framework right, and if we work together to make the regime a success, then, like the World Cup, it’s coming home. Captives are coming home!”

Moving from concept to framework

Commenting on the speech, Cormac Bradley, senior actuarial director at independent financial consultancy Broadstone, said: “The speech doesn’t fundamentally change the architecture of the proposed UK captive regime, but it does something important: it provides much greater confidence in how the PRA intends to deliver it in practice and the type of regime it is seeking to build.

“The emphasis on simplicity, proportionality and flexibility, particularly around capital, sends a clear signal that the UK is aiming to build a regime that is commercially viable and genuinely competitive, rather than a light-touch version of Solvency II.

“For UK and international groups, the key takeaway is that the regime is now moving from concept towards an actionable framework. The PRA is clearly signalling that it wants to develop a pipeline of credible applicants ahead of launch, and those that begin assessing how a UK captive could support their wider risk management strategy will be best placed to shape and benefit from the regime as it evolves.

“With a consultation paper expected this summer and implementation targeted for mid-2027, attention will now turn to the detailed proposals and how firms can engage with the PRA to help shape the final framework. The success of the regime will depend on whether the PRA can translate this clearer, more commercially focused tone into a practical and competitive supervisory framework capable of attracting both UK and international captive formations.”