Solvency capital rules and tax to drive UK captive onshoring

By Navneeta Nandan

July 16 - (The Insurer) - UK-headquartered multinational groups are the most likely to benefit from onshoring or expanding their captive operations under the government's planned captive framework, insurance industry representatives have said.

The UK government said in a consultation response on Tuesday that it is "determined to proceed at pace" to implement a captive regime, with the regulators set to consult on policy proposals in summer 2026.

Hannah Gurga, director general of the Association of British Insurers, said the announcement was a "powerful validation" of the role of the UK insurance sector.

"Smart regulation will sharpen our global competitiveness and unleash our industry's full growth potential whilst also ensuring customers are protected," she said.

Karim Haji, global and UK head of financial services at KPMG, said the planned captive regime, coupled with the consultation on broadening access to ILS, marked "significant progress" in making the UK more competitive as an international insurance and risk transfer solution hub.

"The industry will be watching closely to see how quickly consultations become policy, and how effectively regulatory and market institutions can deliver against the government’s ambitions," he said. "If implemented well, they could boost confidence in the UK as the centre of financial services innovation, investment, and growth."

Chris Lay, CEO of Marsh McLennan UK, said the creation of a UK captive regime will enhance the country's position as a leading insurance marketplace, particularly as the majority of respondents sought to extend the regime beyond the scope of the original proposal to permit more types of firms to set up captives and to allow more types of risks to be insured in captives.

"We need to ensure that the new captive framework will not only allow the UK insurance market to further demonstrate its reputation for innovation but also that captives can be formed as seamlessly as they are in other jurisdictions," said Lay.

Alignment with other international captive domiciles was also underlined by Andy Moore, insurance partner at PwC UK, who highlighted three key areas to make the UK an attractive destination to set up or relocate captives.

"At the moment, key competitor jurisdictions such as Bermuda and Guernsey apply capital standards to captives that are significantly lighter than required by Solvency II," Moore noted.

"Secondly, the UK needs a smooth and efficient regulatory process – competitor jurisdictions have dedicated captive teams able to quickly authorise new captives and respond pragmatically to regulatory matters as they arise, so it is good to see this covered in (Tuesday)’s response."

Moore added that while the tax impact does not broadly form part of the business case for implementing a captive, overall tax position remains a component to some extent when selecting a jurisdiction.

"Global minimum tax does somewhat level the playing field between countries, however the UK will be less efficient than existing domiciles without some changes," he said.

Martina Neary, EY UK insurance leader, added that UK-headquartered multinational groups are likely to benefit from onshoring or expanding their captive operations owing to easier market access.

"In addition, the new regime enables regulatory and tax domiciles to be aligned, reducing tax complexities for UK-headquartered groups, while those groups focused on the UK market with offshore captives can simplify their operations," she said.

"Although navigating the new landscape will undoubtedly have its complexities, the potential benefits and opportunities for businesses will likely be substantial."