PRA and FCA propose a new UK captive insurance regulatory framework, aiming to establish London as a competitive onshore domicile by summer 2027
The Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) have jointly published consultation proposals for a dedicated captive insurance regime in the UK. Captive insurance refers to a wholly owned insurance subsidiary that a company or public institution sets up to cover its own risks, rather than buying cover from a third-party insurer. The proposals include: a streamlined PRA and FCA authorisation process with a target timeline of four to six weeks; exclusion of captives from Solvency UK (the UK's post-Brexit adaptation of EU solvency capital rules for insurers) and Consumer Duty requirements; lower capital and reporting requirements; a flexible capital resources framework; dedicated PRA supervisory resource; and specifically tailored FCA conduct requirements with proportionate supervision and reporting. The consultation closes on 14 October 2026, with a new captive regime expected to launch in summer 2027. Sarah Pritchard, deputy chief executive at the FCA, described the approach as pragmatic and proportionate with appropriate safeguards. Marsh Risk UK chief executive James Addington Smith welcomed the progress, noting that the regime, if delivered competitively, would position the UK as a high-quality domicile for captive risk financing. Insurers have lobbied for these changes for years, arguing that London needed a more attractive regime to compete with offshore centres such as Bermuda and Guernsey.
Why this matters
This is a significant regulatory liberalisation that opens a new market segment in the UK insurance landscape. By carving captives out of Solvency UK capital requirements and the Consumer Duty framework, the regulators are creating a materially lighter-touch regime that could attract large corporates and public institutions to establish UK-domiciled captives rather than using offshore centres. The legal workload generated will span insurance regulatory authorisation, corporate structuring of the captive vehicle, and ongoing supervisory compliance, all of which require specialist insurance regulatory counsel. The four-to-six-week authorisation target, if achieved, would be a genuine competitive differentiator relative to established offshore jurisdictions. The 'why now' trigger is the UK government's broader competitiveness agenda post-Brexit, which has also driven reforms to insurance special purpose vehicle rules and the Solvency UK framework more generally.
On the Ground
A trainee working on a captive insurance authorisation would assist with drafting the regulatory notification and FCA application forms required for PRA and FCA authorisation, prepare licence condition summaries for the client, and help coordinate the compliance gap analysis memo comparing the proposed captive structure against the new regime's requirements.
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Question you might get
“What are the main legal and regulatory issues a large UK corporate would need to consider when deciding whether to establish a captive insurer under the new PRA and FCA framework?”
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