The inclusion of group life in the government’s captive framework has been welcomed but it is not expected to have a major impact on the industry or country unless further benefits are included.
Earlier this week, Health & Protection reported the industry had won inclusion in the HM Treasury’s (HMT) plans for the new UK captive insurance regime, having been excluded from the original proposals.
Following strong responses from the industry, HMT agreed to allow a carve out for group life and other limited types of life insurance product to be covered by a captive insurer.
Trade body Group Risk Development (Grid) said this was a positive move but noted many captive regimes were already highly established and further incentives may be required.
“It is seen as a positive for the UK insurance market to be included but this isn’t a case of ‘If you build it they will come’,” said Grid spokesperson Katharine Moxham.
“The captive market is pretty well invested in the offshore locations and tax havens and the UK would need to have other tax advantages to compete, so it remains to be seen whether it will generate growth.
“These organisations will already be using a captive market from somewhere else, so tempting them from the tax havens or offshore might be a challenge.”
Moxham also highlighted that the UK domestic group risk life insurance market is incredibly competitive and can often negate the advantages to using the captive market.
Plans to enable smaller firms to use captive insurance through protected cell companies (PCCs) were also included in the latest framework proposals.
However, Moxham was not convinced these would be particularly compelling.
“Making captives available to smaller employers is challenging because I can’t see how that would work,” she said.
“For smaller firms they might never see a life insurance claim, but needing to budget for it is difficult.
“I could see smaller firms of similar industries coming together, but self-insurance for smaller employers doesn’t really make much sense,” she added.
Caution and optimism
Cautious-optimism was also the overall approach from consultancy WTW.
Adrien Collovray, head of captive advisory GB, Europe and international at Willis, said the firm was “pleased the government has listened to the call to provide this essential risk management tool to UK companies who would prefer to retain business activity in their home country and support the UK insurance and reinsurance market”.
Collovray added: “As we are yet to understand the details of what this will mean in practice, which we expect to be detailed following the Prudential Regulation Authority (PRA) consultation in 2026.
“We welcome this news with caution and optimism that the regulation will be suitably proportional and enabling as to permit the UK and UK companies to compete with established domiciles.”
