As published on reinsurancene.ws, Friday 25 November, 2022.
During a speech at the Insurance Institute of London, Institute President and Marsh CEO of UK & Ireland, Chris Lay, called attention to how regulatory barriers are preventing the UK from being recognised as a suitable location for captive insurance vehicles, despite it being a global hub for financial services and insurance.
Lay pointed out that for Marsh, a committed and proportionate regulatory regime is now the biggest factor in its clients’ captive domicile selection.
He added that 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.
According to Lay, a UK captive domicile could offer an extensive financial services ecosystem alongside London-based global brokers with extensive captive consulting experience.
It could also provide an unrivalled range of local banking and asset management options and access to the world’s largest and most sophisticated reinsurance market.
Lay continued, “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.”
Though, one of the major concerns involved with captives is the prospect that they promote tax loopholes. On this topic, Lay commented, “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.”