HM Treasury’s Autumn Statement 2023 shows the UK government is set to consult on introducing an arrangement for captive insurers by spring next year.
On page 99 of the document, under a section detailing how the government plans to support the development of the UK financial services sector, it states that the government will “encourage the establishment and development of captive insurance.” “will consult on the design of a new framework for Companies in the UK.
The consultation will begin in spring 2024 and has been welcomed by the London Market Group (LMG), which has been working with the Treasury on this for the past 12 months.
CEO Caroline Wagstaffe said, “London Markets Group is pleased with the announcement today by the Treasury that it will consult on the creation of the UK captive regime by spring next year, taking into account the recommendations under our plan for the future.” LMG.
“As the global hub for risk transfer, London needs to be able to offer all the tools in the toolkit, so this is a big step forward.
“We look forward to working closely with the government and regulators to ensure that the UK remains a highly competitive insurance hub,” he said.
A captive insurance company is a wholly owned subsidiary that is formed to provide risk mitigation services for its parent or related entities. They are typically set up to meet the risk management needs of owners, often offer tax benefits, and are created to cover a wide range of risks.
Importantly, a captive insurer operates like a traditional insurance firm and is subject to regulatory requirements, although potentially less significant than those of commercial insurers. Requirements include financial reporting, capital/solvency support, reserve adequacy and annual actuarial opinions.
With insurance costs rising, companies are increasingly turning to captive insurance to reduce the cost of risk and fill any gaps in their coverage.
The process of setting up the captive regulatory regime will include consultation with market participants and input from specialist law firms and insurance managers.
(TagstoTranslate)Captive Insurance(T)Captives(T)LMG(T)London Market Group
