PRA and FCA propose new captive insurance regime to drive UK growth and competitiveness

What Changed

• - Introduction of a tailored regulatory framework for single‑parent captive insurers in the UK, distinct from the regimes applicable to traditional insurers and reinsurers.
• Creation of a streamlined dual PRA/FCA authorisation process for captives, with an explicit target decision timeline of 4–6 weeks from application.
• Exclusion of captives from Solvency UK requirements, with a move to a separate, flexible capital resources framework rather than Solvency II‑style minimum capital requirements.
• Exclusion of captives from the FCA Consumer Duty, recognising that captives primarily insure intra‑group risks and have limited direct retail customer exposure.
• Introduction of proportionately lower capital requirements for captives, reflecting their lower risk profile and group‑risk‑financing purpose.
• Introduction of reduced reporting requirements for captives relative to standard (re)insurers, including simplified regulatory returns and proportionate supervisory data expectations.

Suggested Considerations

• Assess whether existing or planned group risk‑financing strategies would benefit from establishing a UK single‑parent captive under the proposed regime and document the strategic rationale.
• Map current and planned intra‑group insurance and reinsurance arrangements, including any employee benefits‑related policies, to confirm which risks can be written directly and which must only be written on a reinsurance basis.
• Engage early with internal stakeholders (risk, treasury, legal, tax, and senior management) to determine preferred captive structures (standalone vs future PCC) and governance arrangements aligned with PRA expectations.
• Prepare to participate in the PRA and FCA consultations by drafting detailed, technical responses on authorisation processes, capital methodologies, reporting templates, and conduct requirements for captives.
• Review existing Solvency UK and Consumer Duty compliance frameworks and identify which elements would no longer apply to captives under the proposed regime, while ensuring that any remaining protections and safeguards are maintained where appropriate.
• Design or revise internal capital models and policies to align with a flexible, proportionate capital resources framework, including consideration of contingent capital, factor‑based methods, and clear documentation of capital adequacy for captive operations.

Key Dates

Who is Affected