What does the UK’s captive insurance reforms mean for the sector?

Ahmer Khan  July 16th 2025
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The UK government’s recent announcement of a dedicated framework for captive insurance marks a significant shift in its approach to supporting the financial services sector. 

Speaking on the developments, Ahmer Khan, Head of Insurance at MHA, welcomed the move as a long overdue opportunity to reposition the UK as a competitive domicile for captives. 

“The Chancellor’s announcement at the Mansion House on 15 July that the Government intends to proceed with the introduction of a dedicated, competitive framework for captive insurance is welcome news to the industry and along with measures to boost the finance sector in general reflects the urgent need to ease the regulatory burden that the financial services sector faces and deliver economic growth.

"Rachel Reeves pledged to introduce new rules to simplify the captive insurance sector and while no details were provided, one of the key initiatives expected to be put in place is accelerating the process for authorising new captives. 

"This has the potential to drastically reduce the approval timelines from 6 weeks to 10 days which would allow fast track captives to setup in the UK and could be key trigger for tipping the balance in UK’s favour to be a more competitive as a destination of choice for setting up captive entities.

"Despite having a leading insurance market, London has historically struggled to attract captive insurers to its shores due to regulatory burden, due to a slow authorisation process. The UK and other jurisdictions are competing for the Captive market which is a significant share of the global commercial insurance market."

Ahmer Khan, Head of Insurance at MHA

"Captives currently represent around 20 – 25% of global insurance premiums and it is a growing market due to large insureds looking for more control over their risk management and cost of risk, particularly where they may face rising premiums and limited coverage options in the traditional market.

"Captives are a critical element to the insurance industry in any country, beyond obvious benefits, it helps create an insurance talent pool within the jurisdiction which can then be leveraged off by larger insurers in the market

"Many established captive domiciles, such as Bermuda, Guernsey, and Luxembourg, offer specific tax incentives that the UK has traditionally lacked, making them more financially attractive. They also offer distinct reasons for Captives to establish operations there.

"In Luxembourg the equalisation reserve provisions enable smoothing of underwriting profits over time; Malta is the only EU member state offering PCCs; Guernsey is not bound by SII therefore allowing for greater flexibility and faster setups; and in France there is flexible equalisation reserve treatment under French Finance Law. The UK needs to develop its own USP in order to attract such a lucrative market to UK shores.

"For businesses with operations in both the UK and EU, although a reformed UK captive regime would make it more attractive, the EU risks would still face the challenge of "passporting" rights post-Brexit."

Are you ready for the upcoming changes?

As the UK prepares to roll out its new framework, now is the time for businesses and insurers to reassess their risk strategies, engage with advisors, and explore how captives could deliver both control and commercial advantage.

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