Prudential Regulation Authority consults on tailored UK captive insurance regime with GBP 100,000 capital floor and 4 to 6 week authorisations

The Prudential Regulation Authority has published proposals for a separate prudential regime for UK single-parent captive insurers, replacing reliance on the broader Solvency UK framework for this segment. The consultation would create a distinct category of UK captive insurer with lower and simpler capital and reporting requirements, a flexible capital resources framework and a faster authorisation process, while keeping restrictions designed to reflect the lower-risk intragroup nature of captive business. The regime is being developed with the Financial Conduct Authority, which has issued a parallel consultation on conduct matters. Under the proposals, UK captives could insure group entities and certain connected non-group undertakings, including significant suppliers, franchisees, minority-owned entities and owner-controlled insurance programmes. Compulsory lines and employee benefits would be permitted on a reinsurance basis only, while other general insurance lines could generally be written directly or via reinsurance, subject to safeguards. Non-group business other than owner-controlled insurance programmes would be capped at 10% of total business volume, and smaller non-group undertakings that could trigger Financial Services Compensation Scheme or Financial Ombudsman Service protections would generally have to be written on a reinsurance basis only. The proposed captive capital requirement would be the higher of 10% of net written premiums or 10% of net insurance liabilities, subject to a GBP 100,000 floor that must be met with paid-in capital. Letters of credit and parental or group support agreements could count toward the remaining requirement, loan-backs would be permitted, authorisation decisions for complete applications would target 4 to 6 weeks, supervision would be largely reactive and portfolio-based, and firms would file simplified annual returns and audited accounts. Governance proposals include a single required Chief Executive senior manager function, at least one non-executive director and an assessment of whether an independent non-executive director is needed. The consultation closes on 14 October 2026, with implementation expected in mid-2027 through final rules and policy material. The Prudential Regulation Authority also said it plans a later extension for protected cell company captives once legislation is in place and is seeking views on possible future frameworks for group and association captives.