UK insurers are calling for the rules to be changed to establish a captive insurance regime

Senior insurance industry figures are calling for the UK to resume work on a potential new market worth billions of pounds as part of efforts to boost competitiveness.

Directors have written to chancellor Rachel Reeves asking for a consultation on the creation of a UK captive insurance regime, according to a copy of the letter seen by Bloomberg. The move would allow London to compete more effectively with offshore centers such as Bermuda and Guernsey.

Captive insurers are entities established by companies or public institutions to provide their own insurance. Proponents say they improve risk management and can be complementary to outside insurance, while critics warn they can concentrate losses.

Current UK rules – governed by the Solvency II capital regime – are too restrictive, driving business offshore, according to the letter, sent by AXA XL CEO Sean McGovern, who chairs the London Market Group, which represents London-based insurance companies, and Christopher Lay, chief executive of Marsh McLennan UK.

This means the UK is missing out on a market expected to reach $161 billion globally by 2030, the letter said. The US, France and Italy have all introduced regimes to bring captives overland, it adds.

The Conservative government has promised to consult on creating an easy captive regime to bring more business to London. Industry figures hope Labor will revive the plan, possibly in the October budget.

“A UK captive framework could provide a major boost to the UK and London insurance market and be a tangible example that the UK is open for business,” the letter said.

Treasury officials are looking into the matter and aim to provide more details soon, according to a person familiar with the matter. The Treasury did not comment.

Photo: City of London with a view of the Bank of England. Photo credit: Betty Laura Zapata/Bloomberg

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