The Prudential Regulation Authority’s (PRA) new UK captive insurance regime will go live in the middle of next year.
This is according to Shoib Khan, director of insurance supervision at the Bank of England, in delivering a speech at the Airmic Annual Conference in Birmingham today.
Khan told delegates that if properly structured, captives can prove to be robust risk-financing and risk-management tools supporting risk management and risk transfer.
While mindful of policyholder protection, Khan added a balanced approach with carefully drawn boundaries could enable captives to meet their core purpose.
Use case is clear
“The use case for captives is clear. If properly structured, captives have the potential to advance both the PRA’s primary and secondary objectives,” Khan said.
“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.”
Keeping an eye on policyholder protection
But Khan noted regulators 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,” he continued.
“Whether we have struck the right balance here is an area where we would greatly welcome your input and feedback during our upcoming consultation.”
Balance to be struck
And where a balance can be struck, Khan maintained this would create a “uniquely competitive” UK proposition that 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,” he explained.
“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.”
Carefully drawn boundaries
Khan maintained that the regulator’s policy approach will be to operate carefully drawn boundaries that meet the core purpose of captives.
“We want a regime which is clear, transparent and easy to navigate for firms,” he continued.
“All firms have choices about where to establish captives, and we recognise that a transparent, cost-effective and proportionate regulatory regime will best support access to the unique advantages of locating in the UK.
Evolving regime
Though Khan noted that as with any regime, it will continue to develop over time.
“An obvious example being the commitment of HM Treasury to legislate for Protected Cell Companies (PCCs) to be able to conduct insurance business, potentially opening up a new market for captive users in the UK,” he continued.
“We will continue to work closely with HM Treasury and intend to consult on incorporating PCCs into the regime once the necessary legislation is in place.”
Greater confidence
For Cormac Bradley, senior actuarial director at independent financial consultancy Broadstone, while today’s speech doesn’t fundamentally change the architecture of the proposed UK captive regime, it does provide 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,” Bradley said.
“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.”
Group life inclusion
In July 2025, the Treasury announced it was including the group life and employee benefits sector in its plans for the new UK captive insurance regime, having been excluded from the original proposals.
Expanding ongoing work
And at the end of the year, the Financial Conduct Authority (FCA) announced it was expanding its ongoing work in the captives insurance market to encompass a UK captives insurance regime.
