In a speech at the Insurance Institute of London (24 November 2022), Institute President and Marsh UK & Ireland CEO Chris Lay highlighted how, despite being a global hub for financial services and insurance, the UK is not perceived as a viable location for captive insurance vehicles due to regulatory barriers.
According to Mr. Lay, Guernsey and the Isle of Man are the most common captive jurisdictions for UK-based companies and public sector bodies, but Ireland, Malta, Bermuda, the Cayman Islands and Vermont are also used.
Mr. Lay said: “A committed and proportionate regulatory regime is now the biggest factor in our clients’ captive domicile selection. An ambitious regulatory model for captives, combining a proportionate risk-based solvency regime with London’s global reinsurance market, could make the UK a unique and attractive location for captive investment.”
He added that a UK captive domicile could offer an extensive financial services ecosystem; London-based global brokers with extensive captive consulting experience; an unrivalled range of local banking and asset management options; and access to the world’s largest and most sophisticated reinsurance market.
He said: “New business would be provided to these sectors and new jobs in captive management would be created, as decision making on the captive must be taken within the jurisdiction it is based.”
Answering concerns that captive insurance vehicles promote tax loopholes, Mr. Lay said: “Captive formation is no longer a tax issue. The tax considerations that fuelled offshore captive formation in the past have either been greatly reduced or eliminated either through international agreements or companies’ own reputational concerns. This is why many offshore captives now choose to be UK-domiciled for tax.
“Over the last two years, Marsh has seen the fastest rate of captive growth since the 1980s. At a time when we expect this trend to continue, it is mostly the regulatory aspect, and the proportional, cost effective but highly efficient infrastructure required for running a captive, that prevents the UK from becoming a successful captive domicile.”