The Prudential Regulation Authority has published its consultation paper on a tailored UK captive insurance regime, setting out proposed rules developed jointly with the Financial Conduct Authority for a market that has, until now, had no dedicated home in the UK.
Captive insurance allows a business to insure its own risks through a wholly owned subsidiary rather than buying cover from a third-party insurer. Industry estimates put the number of UK captives currently domiciled onshore at fewer than 10, with an estimated 500 UK-associated captives instead based in Guernsey, the Isle of Man and Bermuda.
The PRA's consultation paper, CP11/26, and a parallel FCA paper, CP26/29, are intended to close that gap. For UK brokers and risk managers, a functioning domestic regime would remove a longstanding reason to domicile risk financing structures overseas, though the practical impact depends heavily on how the final rules are calibrated.
Under the first stage of the regime, covering single-parent captives only, the PRA and FCA are proposing a streamlined authorisation process targeting four to six weeks and excluding captives from Solvency UK and Consumer Duty requirements. Captives would be able to combine direct insurance and reinsurance activity within a single legal entity, and fronting would be permitted for compulsory classes where appropriate.
As a safeguard, captives would be able to reinsure, but not directly insure, employee benefits-related policies. A second stage extending the regime to protected cell companies will follow once primary legislation is in place. The consultation closes on October 14, 2026, with implementation targeted for mid-2027, leaving only months to test whether the proposed authorisation speed holds up once real applications begin.
David Bailey, Executive Director for Prudential Policy at the PRA, said the regime "will enhance the UK's competitive edge in insurance," adding that "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, said a competitive option "could benefit UK companies and support wider economic growth," describing the approach as "pragmatic and proportionate, with appropriate safeguards in place."
Cormac Bradley, senior actuarial director at Broadstone, welcomed the technical design of the regime, saying it "marks a new chapter for UK insurance" and is "not simply a lighter version of Solvency UK, but a distinct, captive-specific regime built around the realities of financing intra-group risk."
He added: "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." Bradley said firms would need "a well-articulated strategy, strong governance, and a clear capital rationale to get comfortable approval," calling the consultation "the starter's gun" for organisations weighing a first-wave application.
Brokers were similarly positive but framed the opportunity commercially. Marsh welcomed the consultation as a "significant milestone for the UK insurance market" that could, if delivered proportionately, strengthen the UK's position as an onshore captive domicile.
James Addington Smith, chief executive of Marsh Risk UK, said: "We will work closely with government and regulators to help shape a framework that is proportionate, competitive and practical to implement."
Marsh flagged areas still needing clarity, including the scope of international employee benefits arrangements and ownership thresholds for joint ventures, and noted a related consultation on redomiciliation for overseas captives considering a move to the UK.
Neither Bradley nor Marsh raised concerns publicly about delivery risk, though the compressed timeline leaves limited room for the PRA to adjust course if early applications reveal gaps.
The push dates to HM Treasury's July 2025 confirmation that it would proceed with a bespoke framework, following more than two years of lobbying by Airmic, the UK risk management association.
The London Market Group projects a domestic regime could attract roughly £100 million in new annual premium and create around 1,000 jobs, and has identified more than 300 UK-headquartered firms with offshore captives that could be brought onshore. Airmic's own membership survey found its members collectively spend more than £5.1 billion in annual premium through captives and hold over £22.6 billion in captive assets, with 72% of those without a captive exploring forming one.
Aon has confirmed it will launch a UK-based captive management company once the regime is in place, while Guernsey, Europe's largest captive domicile with more than 330 captives, has said it expects to remain complementary to rather than displaced by a UK offering.
With the consultation running until October and the regime not expected to go live until mid-2027, insurers, captive managers and corporate risk teams have several months to shape the final rules before UK captives become a live option.
