The London Market Group (LMG) has published a five-point plan asking for relevant regulatory and legislative changes to help grow the industry in the coming months and years, and to take full advantage of the new opportunities open to the UK.
The plan includes increasing the choice of buyers and growing the market by developing and promoting a UK captives market.
Currently, there are no captives based in the UK as it has historically been seen as an unattractive location.
Outside of Lloyd’s, the UK has no specific regulatory framework for captives, instead treating them as insurance companies, even though they are very different entities.
LMG explains that due to this uncompetitive environment, no company has chosen to set up a captive in the UK, despite its extensive financial services ecosystem.
“We believe that there are few barriers to the UK creating a domestic captives market. Captive
insurance is not defined or referred to in the Irish Insurance Acts or regulations. Instead, the Central Bank of Ireland uses the definitions of a ‘captive’ in Solvency II as the basis and
justification for its differentiated approach,” says LMG.
The current Solvency II Review offers the UK an opportunity to develop a more attractive regime for captives. LMG says it would welcome further discussions with HM Treasury and the Prudential Regulatory Authority (PRA).
Other points in LMG’s plans include making London a natural home for foreign (re)insurance companies by reforming the Solvency II regime.
LMG suggests going through the “additional and unnecessary” regulatory processes which duplicate work already performed by other trusted regulators is very costly and time-consuming and acts to inhibit overseas firms from operating in the UK.
“The PRA has the ability to resolve these issues within the current framework and without compromising its own compliance with the Solvency II regime or the prospects of a subsequent equivalence ruling with the EU,” LMG comments.
LMG has also called for the government, the regulators and industry to work together to recognise the nature of the large complex risks we cover and the sophisticated corporate buyers we serve, through a more proportionate approach to regulation.
It also wants to ensure that the London Market remains the most attractive home for large risks through an international competitiveness duty for UK regulators.
Finally, LMG says gaining access to emerging markets around the world will help them to build resilience against natural disasters and climate change events through trade negotiations, regulatory dialogues and market promotion.
Sean McGovern, CEO of UK and Lloyd’s at AXA XL and sponsor of LMG’s government relations work, comments: “Right now, the UK government is looking at how financial services should evolve in a post-Brexit world, and the London market wants to seize the moment while there is a willingness to support positive change that can benefit the insurance industry.”
“The LMG has taken part in various government consultations on the future regulatory framework and Solvency II. This document will form the backbone of a comprehensive campaign by the LMG, working with ministers, parliamentarians and the regulators to reinforce the importance of the insurance market and to ask for what it needs to continue to grow globally.”
“We have put forward a five-point plan to support the UK’s competitive position, grow our exports and deliver increased levels of foreign inward investment into both London and across the regions of the UK, where the market is expanding,” McGovern adds.
