Risk managers seek a graded system for prospective UK captive regime

Airmic, the United Kingdom’s risk management association, said if the country becomes a captives domicile, the U.K. should implement a graded regulatory regime for captives, similar to Bermuda or Singapore, which offers proportionate treatment depending on the level of risk.

Airmic was responding to the U.K. government’s consultation on captive insurance that closed on Feb. 7.

The group also said if a graded classification system for captives is adopted, additional categories, such as captives that write related third-party business, could be created that face different regulatory oversight.

Airmic CEO Julia Graham said the U.K. should clearly define what would qualify as a captive insurer or reinsurer and offer a “proportional, risk-based regulatory regime that facilitates a range of uses.”

“After consultation with our members, we urge the government to design a regulatory regime that is fit for the growing ambition of captives,” an Airmic said. “From the outset, there needs to be straightforward, responsive, fast and cost-effective regulation and servicing to reduce the barriers to entry.

U.K. finance minister Rachel Reeves announced the long-awaited captive consultation last November.

The move follows lobbying from various groups, including the London Market Group, which represents London’s commercial insurers.

The LMG also supports proportionate treatment for captives in the UK.

The moves in the U.K. follow the launch of a captive-friendly regime in France.

“As captives continue to go mainstream, the UK is in a unique position to offer a fit-for-purpose regulatory regime alongside the world’s largest and most advanced commercial insurance market,” said Richard Cutcher, captives ambassador for Airmic.

Marsh McLennan’s UK CEO Chris Lay said any new framework must be built with “appropriate and proportionate regulation and capital requirements”.

In its submission to the consultation, Marsh McLennan said the U.K. captive framework should offer:

·       A speedy and efficient application process.

·       Capital and reporting requirements that are fair, proportionate and reflective of the low-risk nature of captives.

·       Costs that are competitive but allow for sufficient resources to support effective regulation and oversight.

·       Regulation that is scaled to ensure it is fit and proper for the captive market.

·       Sufficient flexibility to allow the U.K. captive market to develop and expand.