It’s Coming Home − speech by Shoib Khan

Speech

I’m delighted to be here at the Airmic Annual Conference in Birmingham. The chance to speak to you today is timely for two reasons. Firstly, because the PRA plans to shortly issue a consultation paper on our plans for a UK captive regime, and, secondly, because we’re very close to England’s first match in the World Cup. It’s hard to tell which will generate more excitement, but the link between the two will become clear in due course.

I’ll begin by recapping the journey we’ve been on with captives, since recapping England’s World Cup journey might take too long.... When the PRA attended the original roundtable hosted by the City Minister in September 2023, the industry ask on captives was in its infancy, and we were at the early stages of thinking about what the UK captive regime could most usefully look like. In 2025, the PRA gained the powers to amend the relevant rules in its rulebook, giving us the means to create a bespoke captive regime. Fast forward through HM Treasury’s own consultation papers^{footnote [1]} and the Subject Expert Groups (SEGs)^{footnote [2]} we held in collaboration with the FCA, and the scope on what captives might do has expanded significantly. The use cases show clear potential for firms seeking to access additional risk-financing vehicles, while benefiting the UK insurance industry and economy more broadly and, as I’ll explain below, advancing our own regulatory objectives.

This latest evolution of a UK captive regime is not without precedent. The UK has a long history with captives. From the 1920s and 1930s, a number of large UK corporates operated onshore, wholly owned, insurance companies to write the risks of their own groups. These vehicles insured everything from chemical and pharmaceutical risks, through shipping, energy and mining, to large industrial exposures. They were, in many respects, early captives embedded in the businesses they served, closely aligned to risk management, and focused on long-term resilience rather than short-term profit. While a number eventually moved to offshore domiciles, one or two survived into more recent times.

Birmingham provides a fitting backdrop for discussing that history. As a city at the heart of the industrial revolution, Birmingham was home to ‘complex and emerging risk’ long before this phrase was in common usage. This was well-known to engineer and manufacturer Matthew Boulton, whose famous partnership with James Watt led to the revolutionary Boulton and Watt steam engine. Indeed, the pairing were renowned enough to have featured together on the reverse of the fifty-pound banknote that entered circulation in 2011. What’s less well known is that Matthew Boulton’s Soho Manufactory, which was located in Smethwick – a stone’s throw from where we are today – had one of the world’s earliest employee insurance schemes, set up in the 1770s. For members contributing a halfpenny a week, the scheme provided a payment of one shilling a week to cover illness. In many respects, this was like an early form of captive, focused on providing employee benefits insurance. History tells us that similar in-house insurance arrangements and risk pooling went on to become a natural complement to that industrial ecosystem, allowing firms to retain and manage the risks they understood best, while supporting investment and innovation. In many ways, the use of captives today is a continuation of that same idea: pairing risk, capital and expertise close to the underlying business.

The 1950s and 60s saw an offshore pivot for those UK ‘captives’ established earlier in the century. With a new captives regime expected in 2027, the ambition is to see the opposite: an onshore pivot, with captives – as the modern successors to those early arrangements – choosing the UK as a competitive and credible home.

Preparing the pitch

As mentioned above, from our perspective the use case for captives is clear. If properly structured, captives have the potential to advance both the PRA’s primary and secondary objectives. They can be robust risk-financing and risk-management tools, helping to share risk across the system, match capital more closely to risk, drive data improvements across the market, and bridge protection gaps where commercial insurance capacity is constrained. They can also act as incubators for emerging and hard-to-place risks – from cyber and climate-related exposure to supply-chain disruption – supporting innovation in insurance. These outcomes support prudent risk management and risk transfer, with positive implications for firms and the wider UK economy.

Of course, we need to keep an eye on risks to policyholder protection, particularly where captives expand beyond their original purpose to write business outside of their own group. However, a balance can be struck by setting a clearly defined perimeter that enables captives to meet their core purpose as group risk financing vehicles without scoring any own goals. Whether we have struck the right balance here is an area where we would greatly welcome your input and feedback during our upcoming consultation.

And if we get that balance right, creating a uniquely competitive UK proposition can deliver real, practical benefits for UK based companies. A captive based in the same location as the group itself brings tangible advantages: boards, brokers, advisers, fronting insurers and reinsurers all operating in a single time zone, with direct access to the unique ecosystem of the London insurance market. This enables more efficient use of management time and supports simpler, more effective governance. Combined with the UK’s strong reputation for regulatory and legal expertise, it forms a compelling and powerful proposition.

The ‘goal’, to borrow another footballing term, is to define a regime with a clearly marked field of play: what captives can and cannot do, and, critically, who they can and cannot insure. If we get those touchlines right, we can have an internationally competitive, responsive and bespoke regime that does not compromise safety and soundness or policyholder protection.

Progressing to the next round

We have already said publicly that we expect to issue a consultation paper in summer 2026,^{footnote [3]} and that remains our working assumption – so expect to see something soon. Whilst I can’t front-run all the detail of the proposals, I do want to emphasise today that we have been listening carefully, working closely with the FCA, and that several clear messages have emerged from our engagement with stakeholders and industry experts.

To begin with, while experience of a UK regime builds, and lessons are collectively learned, our policy approach will be to operate carefully drawn boundaries that meet the core purpose of captives. We want a regime which is clear, transparent and easy to navigate for firms. In thinking about our regulatory approach, we have found our engagement with external stakeholders to be incredibly useful. The discussions at our SEGs last year indicated that, for the regime to be competitive and commercially successful, there is a need for proportionality and clarity - particularly around capital and the role of contingent capital; as well as around governance and reporting requirements.^{footnote [4]}

The SEGs discussed the merits of moving away from Solvency II-based minimum capital requirements towards a simple, factor-based approach for captives.^{footnote [5]} They also discussed taking into consideration the form of that capital and how it can be deployed for it to not be seen as being trapped in the captive. And to reduce cost and burden, the SEGs explored proportionate regulatory reporting with consideration for the complexity and scale of each captive.

Those SEGs expressed a clear preference for transparent authorisation processes, fees and service standards for new captives; and a knowledgeable and responsive team behind these authorisations with a mandate to move fast.^{footnote [6]} Those same groups also highlighted the benefits of an appropriately tailored supervisory approach to ongoing oversight^{footnote [7]} All firms have choices about where to establish captives, and we recognise that a transparent, cost-effective and proportionate regulatory regime will best support access to the unique advantages of locating in the UK.

And, as with any regime, it will continue to develop over time. An obvious example being the commitment of HM Treasury to legislate for Protected Cell Companies (PCCs) to be able to conduct insurance business, potentially opening up a new market for captive users in the UK.^{footnote [8]} We will continue to work closely with HM Treasury and intend to consult on incorporating PCCs into the regime once the necessary legislation is in place.^{footnote [9]}

We accept that we are, in some respects, like a newly qualified cup team which means that we need to be determined to build credibility quickly and deliver consistently on what we say we will do. We are conscious that the philosophy we bring to captive supervision will matter just as much as the rules themselves. Or, in other words, like any successful cup team, we need to match technical skill with ambition and a winning mentality.

When the consultation is published, we will be keen for this audience to engage actively with it. We will set out clearly how to respond, the length of the consultation period, and the areas where we are particularly keen to hear views – both directly and via Airmic.

As I mentioned at the outset, having engaged with stakeholders from across the captive landscape, we can see the regulatory and economic benefits that captives can bring. But most importantly, we know this will be a collective endeavour. It will require constructive responses to the CP and a shared effort across firms, advisers and practitioners to build the regime over time.

Eyes on the prize

We expect the regime to go live in mid-2027. Much like a pre-match warm up before kick-off, between now and implementation we want to work with industry and potential captive owners to support a pipeline of potential applicants. We recognise that a UK captive regime has real long-term potential, particularly as experience builds, confidence develops, and firms become more familiar with how captives can be used effectively within a UK regulatory framework. But we also recognise that the work would not end when the regime goes live. In many ways, that is when the most important phase begins - for firms and for the wider market, as well as for us.

Whilst I have spent some time discussing the future of captives, it’s also worth referring back to the rich history I mentioned earlier. The UK has long provided a home for innovative and entrepreneurial insurance expertise, and we hope that the proposed regime will further enhance its position as an internationally competitive marketplace.

And so, to return to where I began – and as I promised at the start of my speech – if we get the framework right, and if we work together to make the regime a success, then, like the World Cup… it’s coming home. Captives are coming home!

I am grateful to Madeleine Lynch Williams, Tom Perkins and John Reed for preparing these remarks. I am also grateful to Talitha Linley, Alan Sheppard, Anna Andreas, Manuel Sales, Anthony Brown, Gareth Truran, Yevgine Asatryan, David Cabral, Chris Collins, Vicky White, Cassandra Archer, Paul Brione and Catherine Nelson for their support and comments.