UK captives regime: key points from PRA roundtable

This week the PRA held a roundtable with industry to discuss its plans for a new bespoke UK captive insurance regime. We summarised the substance of the PRA paper and the accompanying FCA consultation in an earlier blog post. This article focuses on the PRA’s roundtable on 17 September and should be read alongside our earlier post for the underlying detail.

A few themes ran through the discussion.  In particular, the PRA and FCA emphasised the importance of establishing a regulatory framework that is proportionate and appropriate and both welcome suggestions through the formal consultation process for how it might be improved.  They are also keen to work constructively with firms, including in the lead-up to the regime going “live”, to ensure that the new regime is a success. HM Treasury (HMT) representatives also contributed to the discussion.

AUTHORISATION AND SUPERVISION

Discussion at the roundtable covered a range of topics relating to the authorisation process:

• Early engagement – The PRA and FCA are considering what support they can offer before the regime has legal effect so that captives can be up and running as soon as possible. Whilst draft applications can be reviewed and guidance issued, both recognised that there would be limits on what they can do before the regime is properly in force.
• 4-6 week authorisation process - The 4-6 week authorisation clock will only start once both the PRA and FCA are satisfied that an application is complete, meaning they have enough information to make an assessment and that it has no material gaps. Before that point, the PRA will support applicants who will each have a named case officer to contact. On the interaction with any Senior Manager Function (SMF) approvals, it was confirmed that the intention is for the whole application, including any SMF applications, to be reviewed together within that same 4-6 week window.
• Redomiciliation – Although the UK currently does not have a redomiciliation regime, the PRA confirmed it is willing to work with captives that want to redomicile to the UK. HMT confirmed that work is ongoing within government on introducing a regime applying across all sectors.  However, this would require primary legislation and cannot be expected in the near future. In the meantime, the PRA will do what it can to help within the existing legal framework.
• Approach to supervision - The PRA emphasised that its concern to ensure that the regime is proportionate and appropriate carries through into supervision. Consistent with this approach, it confirmed that supervision is intended to be reactive.  It will not contact firms without good cause, relying instead on data to monitor their activities.

FINANCIAL RESOURCES

There was recognition that the PRA's approach to capital requirements is helpful and would mean the regime is genuinely competitive.  A couple of points that were noted:

• Capital for complex or hard-to-insure risks - as a starting point, the PRA proposes to calibrate the captive capital requirement (CCR) using a 10% factor applied to net written premiums or net insurance liabilities, subject to an absolute floor. Where a captive's risks are more complex or higher risk, boards will be required to consider whether it should hold additional capital in excess of its CCR. Guidance in the PRA’s draft supervisory statement describes what good practice looks like but firms are only required to share their analysis with the PRA if asked.
• Solvency UK groups - concerns were expressed about the application of Solvency UK group supervision rules to groups that contain a captive, including that the benefit of less onerous capital requirements applying to captives may be lost on consolidation.

GOVERNANCE

In relation to governance, it was again confirmed that the proposed approach of both regulators is intended to remain proportionate. There was some discussion about whether the PRA expects independent representation on a captive's board. The PRA confirmed this is not mandated although it may be a point it raises during pre-application discussions depending on an applicant's particular circumstances.

TAX

Finally, HMT confirmed it has no intention of introducing a bespoke tax regime for captives, or for PCCs when they are brought into scope. Captives will be taxed in the same way as other insurers and there will be no further consultation on this point.

NEXT STEPS

The PRA and FCA consultations both remain open until 14 October 2026 and implementation of the new regime for single parent captives is expected in mid-2027. No firm timetable exists yet for extending the regime in other respects. The regulators intend to wait for consultation responses before deciding on next steps.

As regards extending the regime to PCCs, HMT noted that the Financial Services and Markets Bill contains a new power to legislate to allow PCCs to carry out regulated insurance activities. Secondary legislation would then be needed to expand the range of regulated activities available to PCCs and make related changes. HMT intends to move as quickly as possible in this respect and may consult informally on the changes. Once the legislation is in place, the PRA would need to consult separately on new rules that would limit PCCs to conducting business as captives. 

We would be happy to discuss the proposals further with you or your captive strategy more broadly.