Airmic ‘encouraged’ by discussions over new UK captive regime

Risk and insurance management association Airmic said it is encouraged by discussions between the London Market Group (LMG), government and insurance industry experts to create a new captive regime in the UK that operates outside the confines of Solvency II. As first reported by Commercial Risk Europe, a roundtable was held this week between the government, the LMG and experts from across the risk transfer chain, including those from Airmic, to discuss proposals for a new UK captive regime. Over the past two years, the LMG has drafted proposals to create an onshore captive regime in the UK under the group’s broader plans to bolster the insurance market’s competitiveness. The LMG told CRE that its proposals, with technical support from Airmic, are quite advanced. They would see legislation that allow a new class of captive insurer, created and regulated outside the Solvency II regime. The LMG has urged government to develop specific guidance for captives that focuses on reduced prudential risk assessments, a swifter approval process, reduced reporting requirements, lower capital requirements and reliance on wider group functions, such as auditing. It said that the roundtable this week was attended by captive owners, brokers, insurers and the wider risk management community, and was the first time government has convened market experts to listen to the benefits a captive regime could bring to the UK. Airmic CEO Julia Graham and the association’s captive ambassador Richard Cutcher, as well as several Airmic members that own captives, attended the event to share their thoughts on the benefits of captive insurance and what a good captive regulatory regime might look like. Graham said after the meeting that Airmic is “encouraged by the enthusiasm of the LMG and government to explore the practicalities of introducing a captive regime in the UK that would provide our members with another captive domicile option”. “The UK already a world class (re)insurance centre, has the potential to offer a unique proposition for captive owners, with expert service providers and a trusted strong governance community already in place, and a talent pool of professionals with a deep knowledge and experience in all aspects of managing risk and risk financing,” continued Graham. She stressed that a proportionate and fit-for-purpose regulatory captive environment would need to be developed with clear guidance, have commitment from government, and need regulators that demonstrate they are prepared to back captives for the long term. Graham said Airmic is looking forward to engaging further on the topic with the LMG and UK government. Cutcher reiterated Airmic’s stance that any UK captive regime should be implemented outside of Solvency II so captives can be regulated on “a more proportionate basis”. European and UK captive managers have long complained that Solvency II places onerous reporting and capital requirements on captives. The EU and the UK are both currently reviewing Solvency II, with more proportionate treatment for captives on the cards. Cutcher said Airmic members are currently “well served by captive domicile options, but the UK, with all the (re)insurance infrastructure and expertise it already has in place, has the opportunity to present something compelling”. “Airmic is always keen to explore opportunities to widen the pool of solutions and options available to members who own a captive or are considering forming one in the future,” he added. Andrew Griffith, the UK’s economic secretary to the treasury, who attended the roundtable this week, said it was great to meet with key insurance and risk management industry leaders and financial services regulators to explore the case for designing a competitive UK captive insurance regime. “I am thankful to the London Market Group for bringing us all together, and I look forward to continuing to work with industry to support growth and international competitiveness across the UK’s insurance sector,” he said. CEO of the LMG, Caroline Wagstaff, told Commercial Risk that the captive proposal has broad support among the insurance and risk management communities. “We have been talking with the broking and underwriting community about this for a year, and everybody thinks it is a good idea. If London is to be the leading global risk transfer market, you need to be able to offer everything in the tool kit to your risk management clients. At the moment, [a UK captive solution] is a risk transfer tool that London cannot offer. Making sure we have the widest possible offering is an important thing to do,” she said. UK-based risk managers that have spoken with LMG on this issue are also supportive, according Wagstaff. “I have not spoken to anyone that does not think this is a good idea. Most risk managers want a flexible and robust captive regulatory regime, and would often like it closer to their home operations, due to economies of scale and reputational considerations,” she said. Airmic will host its next Captives Forum at Lloyd’s of London on 6 March 2024.

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