AM Best says the UK insurance regulator’s proposed framework for single parent captives is expected to create a regime that compares well with other established captive domiciles. The rating agency sets out its assessment in a commentary, UK Plans for a New Flexible and Competitive Captive Insurance Regime Take Shape. AM Best says UK-domiciled corporations are likely to consider establishing captives in the UK given the flexibility around capital and operational structures, but that taxation is expected to be a key consideration. Patrick McCrystal, financial analyst at AM Best and one of the authors of the commentary, says: "For UK corporates, the proposed captive regime could mean keeping risk management and governance within the country and avoiding offshore governance complexities. Nonetheless, for parent companies, taxation is expected to be a key consideration. UK captives are expected to be subject to a standard UK corporate tax rate whilst some of the other established domiciles have lower tax rates." The Prudential Regulation Authority published consultation paper CP11/26 on 14 July, setting out proposed rules for a tailored captive regime developed in cooperation with the Financial Conduct Authority, which published its own paper, CP26/29, the same day. Both consultations close on 14 October. The FCA says there are currently no captive insurers established in the UK, with businesses wanting the structure typically setting up in other jurisdictions.
