The UK’s plan to introduce a bespoke captive insurance regime could reshape risk financing for some organisations. But with implementation still two years away, risk managers must weigh the practicalities, assess the fit, and prepare to engage.

The UK government has confirmed it will move forward with a bespoke regulatory framework for captive insurance.

Captives have become a core part of modern risk financing strategy. As insurers pull back from difficult classes and capacity remains volatile, many organisations are turning to retention as a way to improve control, pricing and alignment with risk appetite.

Captives

But until now, UK companies have had to look offshore to set up captives, and that has limited uptake, particularly among mid-sized groups.

Regulatory clarity, with more detail to come

The new regime, announced in the Chancellor’s Mansion House speech, responds to that challenge. It will give companies the option to domicile their captive in the UK, supported by a regulator-designed framework that recognises the lower risk profile of captive insurers.

As the government put it, improving the UK’s captive insurance offering will support broader economic and financial resilience goals.

It said: “Improving the UK’s captive insurance offering can also support the government’s wider aim to promote growth in the economy, both via expanding the range of insurance services that can be offered in the UK and also by giving businesses in the UK a greater range of risk management options.”

“We are committed to playing our part by developing a proportionate authorisation and regulatory regime for captives reflecting the lower risk they pose”

For UK-based risk managers, this means greater optionality and a potential opportunity to rethink how risk is financed across the business.

The Prudential Regulation Authority and Financial Conduct Authority have confirmed they will launch a joint consultation in summer 2026, with implementation expected by mid-2027. Their stated aim is to create a proportionate and efficient regime, tailored to the specific nature of captives.

“We are committed to playing our part by developing a proportionate authorisation and regulatory regime for captives reflecting the lower risk they pose,” the PRA and FCA said in a joint statement.

Subject expert groups will be convened to inform policy development and technical detail. Risk managers should watch closely, particularly around capital requirements, reporting and timelines for approval.

Interest already high

Data from Airmic shows that many large UK businesses are already using captives. Member organisations place more than £5.1 billion in annual premiums through captives, with more than £22.6 billion in captive-managed assets. Of those not already using one, nearly three-quarters are actively exploring the option.

Julia Graham, CEO of Airmic, said the new regime would give members greater scope to use captives strategically. “The UK is home to some of the top risk and risk-financing expertise in the world.

“With global demand for captives growing, having an onshore captive domicile alongside the world’s most advanced commercial insurance market will be a huge asset to our members and other captive owners. It will strengthen their options to deploy captives in new areas and to achieve intelligent and resilient risk financing strategies.”

“The UK has long been the epicentre of insurance. An ambitious UK captive insurance regime will further reinforce this position”

Meanwhile, Scott Feltham, group head of insurance at Compass Group, sees the new regime as a way to reinforce the UK’s position in global risk financing. “The UK has long been the epicentre of insurance. An ambitious UK captive insurance regime will further reinforce this position, making the UK the foremost domicile for transacting insurance business.

“This will also serve as a key contributor and add greater diversity to the UK’s wider financial services ecosystem and the broader economy.”

Momentum is already building. Aon has announced plans to launch a new UK-based captive management company in anticipation of the framework, allowing clients to structure programmes domestically. The move signals both confidence in the regime and growing client appetite.

Captives as a strategic risk tool

For many risk professionals, captives are no longer just about plugging gaps in the market. Used effectively, they can help organisations retain more risk at an acceptable cost, support data-driven decision making and test innovative covers that are not yet commercially available.

As risk governance becomes more integrated across organisations, captives are increasingly being used to support strategic risk goals – whether that’s aligning with ESG targets, supporting global supply chain resilience or incubating cyber programmes in volatile markets.

The ability to run a captive onshore may also help risk managers secure stronger internal alignment. For some boards, redomiciling an offshore entity can unlock new governance or tax advantages. For others, it may make launching a captive viable for the first time.

“A clear and predictable regulatory regime will enhance investor trust, encourage inward investment and help create more high-paying specialised jobs.”

Sean McGovern, chair of the London Market Group, noted that captives are now seen as a critical part of the risk transfer landscape. “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. This announcement is clear evidence of the government recognising the London market’s role as a contributor to growth and delivering on commitments to support the industry as we continue to enhance the market’s world-leading position.”

But the success of the regime will depend not just on policy design, but on practical implementation. Chris Jones, chief executive of the International Underwriting Association, stressed the importance of delivery: “A clear and predictable regulatory regime will enhance investor trust, encourage inward investment and help create more high-paying specialised jobs. In order to be successful, it must also be actively promoted, with responsive, cost-effective supervision that minimises market barriers to entry.”

One important innovation will be the introduction of protected cell companies (PCCs), which allow individual captives to operate within a larger shared structure. This is expected to lower costs and regulatory hurdles, making captives viable for smaller organisations or those testing out new lines such as cyber, employee benefits or ESG-linked risks.

What risk managers should do now

Although full implementation is still two years away, organisations should begin assessing the potential fit of a captive under the new UK regime now. For those already running captives offshore, this is an opportunity to reassess domicile strategy. For others, it may be the first time a captive becomes viable.

Actions to consider:

  • Review your current risk financing structure: Are there coverage gaps, volatility issues or emerging risks where a captive could add value?
  • Evaluate PCC potential: Would a cell structure offer a stepping stone to broader retention?
  • Build internal engagement: Educate finance, tax and executive teams on how the UK regime might align with wider business goals.
  • Monitor the consultation process: When the PRA and FCA begin their review, ensure your business provides input or works through an association that does.
SR Q2 2025 Edition