UK Captive Insurance: A New Tailored Regulatory Regime

On 14 July 2026, the Prudential Regulation Authority and Financial Conduct Authority (FCA) published parallel consultations proposing a tailored UK regime for captive insurers. Although UK captives are already possible, the absence of a proportionate framework has led many UK groups to establish captives offshore. The proposals are intended to make the UK a more competitive captive domicile. The consultations close on 14 October 2026, with implementation expected in mid-2027.

Scope

The initial regime would apply to single-parent (pure) captives, which principally insure or reinsure risks of their own group and certain closely connected parties. It would sit outside Solvency UK as a separate, lighter framework reflecting the lower risks generally associated with pure captives.

Permitted Business

In broad terms, UK captives could write most group corporate nonlife risks directly. Compulsory insurance, certain employee benefits, and other business involving individual beneficiaries would generally be permitted only on a reinsurance basis behind a conventional insurer that is subject to Solvency UK. Limited cover for certain non-group parties, including key suppliers, franchisees, and minority-owned entities, would also be permitted, generally subject to a 10% cap and additional safeguards.

Capital

The capital requirement would be the higher of £100,000, 10% of net written premiums, and 10% of net insurance liabilities. The £100,000 floor would need to be met with paid-in Tier 1 capital, while qualifying parental guarantees and letters of credit could (subject to conditions) be used for additional amounts.

Authorisation and Governance

The proposals include a four-to-six-week target for deciding complete applications, simplified governance centred on an SMF1, and reduced regulatory reporting. The FCA would also disapply a number of retail-focused requirements, including the Consumer Duty.

Next Steps

For groups operating an offshore captive or considering establishing one, the proposals may make a UK domicile more attractive, particularly where proximity to the group and the London market is important.

To discuss how the proposed regime may apply to your group, including the implications for existing structures and responding to the consultation before it closes on 14 October 2026, please contact your usual Sidley contact or a member of our insurance M&A and regulatory team.