The Prudential Regulation Authority (PRA) confirms it will consult on a new UK insurance captives regime in summer 2026, with the regime expected to launch in summer 2027. The use of protected cell companies (PCCs) as captives, however, will not form part of the initial framework. The regulator's statement, published on 29 April 2026, responds to HM Treasury's (HMT) consultation response on changes to the Risk Transformation Regulations, also published the same day. HMT confirms it intends to introduce primary legislation, as soon as Parliamentary time allows, to clarify funding expectations for transformer vehicles and to provide the powers for secondary legislation enabling PCCs to operate as insurance undertakings. The PRA says the new captives regime is intended to "increase the attractiveness of the UK as a centre for wholesale insurance services and widen access to the risk management benefits of captive insurance". Because the legislative changes required to enable PCCs to operate as insurers will not be in place in time, however, this feature will neither form part of the consultation nor the regime at launch. The regulator commits to consulting on incorporating PCCs into the captives regime once the necessary legislation is enacted. The PRA notes that PCC structures can offer a more affordable entry point for smaller commercial businesses and may serve as a pilot route for organisations taking their first steps towards establishing standalone captives. The captives consultation forms part of a wider government programme to position the UK as a competitive onshore alternative to established captive domiciles such as Guernsey, Bermuda and the US state of Vermont. The original captive insurance consultation, launched by HMT in November 2024, acknowledged that the UK was not currently perceived as an attractive destination for the establishment of captive insurance companies. HMT published its response to that consultation in July 2025, alongside the Chancellor's Mansion House speech and the Leeds Reforms package. The Financial Conduct Authority (FCA) and the PRA confirmed in a joint statement issued in July 2025 that they will develop a proportionate authorisation and regulatory regime for captives, reflecting the lower risk they pose. The two regulators are setting up subject expert groups with stakeholders, including users of captives and financial services firms, to gather feedback for policy development. The London Market Group (LMG) estimates that the reshoring of captives could deliver £153 million in economic value to the UK, with each captive established in the country contributing approximately £225,000 annually to the economy. The LMG projects the universe of potential UK captives at just under 700 firms. On the insurance special purpose vehicle (ISPV) framework, which underpins the issuance of insurance-linked securities (ILS) and catastrophe bonds, the PRA notes it already introduced reforms in 2025, including an accelerated authorisation pathway for certain ISPVs and a 10-day target for approvals of qualifying ILS arrangements. The regulator says it plans to consult on further ISPV reforms intended to add 'simplicity, flexibility, access' and to also improve PCC use for ISPVs, in due course following the removal of legislative barriers. HMT's RTR consultation response confirms it will legislate to give the PRA more flexibility to make rules on appropriate funding options for transformer vehicles, without undermining the 'fully funded' requirements under Section 284A of the Financial Services and Markets Act 2000. It will also enable cells in a PCC to take on multiple risks from multiple persons, and remove the prohibition under Regulation 57 of the Risk Transformation Regulations 2017 that currently prevents PCCs from carrying out contracts of insurance. HMT says respondents to the July 2025 RTR consultation are "consistently positive about the legislative changes proposed", and that the changes address aspects of the framework that have been holding the UK's offering back. The PRA states that both its intended ISPV reforms and the planned introduction of the new captives regime will support the competitiveness and growth of the UK insurance sector and the wider UK economy. Captive insurance is described by the regulator as a means of self-insurance and risk management used by commercial entities and, less often, by public organisations. The captives consultation paper is expected in summer 2026, with HMT targeting an operational regime by mid-2027.
