In her second Mansion House Speech in July 2025, Chancellor Rachel Reeves unveiled plans to create a ‘new competitive framework’ for captive insurance,1 expected to be implemented in mid-2027.2 The signal to more favourable treatment of UK domicile captives makes now an excellent time for organisations to reconsider their approach and appetite toward risk.
Captive insurance companies (captives) and protected cell companies (PCCs) are regarded as alternatives to traditional insurance, offering convenient structures for companies or groups to retain and manage their risks. The earliest captives are thought to have existed in the 19th century or earlier.3 As organisations develop their capacity in the identification, evaluation and management of risk, captive solutions can unlock further value of their risk management function and take advantage of potentially favourable taxation and regulatory treatment.
With setup times ranging from months to well over a year, depending on the size, complexity and domicile of the captive,4 thorough forward planning can make the launch or relocation of a captive a smoother process. Setting up a captive is a strategic, long-term investment. To optimise the benefits of this structure requires careful planning, a robust foundation of data, strong governance and a deep understanding of underlying risk management.
The Prudential Regulation Authority (PRA) and Financial Conduct Authority (FCA) are planning consultations for the summer of 2026 on rules and policies for an ‘effective and competitive UK captive insurance regime.’5 This comes alongside planned legislative reform around PCCs, with consultation closing in early October 2025.6 The UK aims to be more attractive for captives, addressing its limited presence in this space.
In this paper, we discuss how these forthcoming reforms could reshape an organisation’s risk management strategy, weighing up some of the key advantages and disadvantages to assist in determining whether a captive might be the right solution.
What is a captive insurance company? Why would you consider a captive structure?
In simple terms, a captive is an insurance company wholly owned and controlled by its parent, which is often (but not always) the insured.7 As such, it operates in a similar way to an insurance company—collecting premiums, paying claims and being subject to regulatory oversight, capital requirements and ongoing monitoring. A captive is a type of self-insurance; an organisation puts its own capital at risk rather than transferring it to a third-party insurer, although captive solutions can also be used in tandem with (re)insurance partners to cede different segments of risk.
Captives help organisations to cover gaps in the insurance market, often when coverage is unavailable, overpriced or doesn’t reflect the company’s risk profile. A captive can offer stability (in costs and cash flows) in a hardening market, and greater financial resilience and flexibility by implementing its own specific insurance structure. These tailored solutions could allow for better alignment to business objectives, such as increasing payment speed to customers, providing immediate access to capacity or planning through emerging risk such as supply chain or political risks, which may not be offered by insurance markets.
Captives can also provide access to reinsurance markets—allowing the company to take a centralised view of which risks to retain and the level of retentions, while pooling the remainder for volume and diversification with a reinsurance partner.
Captives can be attractive when the organisation has a deep understanding of its risks, as internal pricing can be responsive to risk management. Risks are quantified as part of the premium-setting process which can help to create a centralised, transparent and unified view of risk without some of the distortions of the broader insurance market. Companies that have invested in strong risk management, and feel this is insufficiently recognised by insurers, may find benefit in a captive arrangement.
The financial feasibility of the captive will depend on several factors. Compared to insurance companies, captives avoid acquisition and distribution costs while retaining investment returns and insurer profit margins. However, there is additional effort and expense in establishing, administering and managing the captive structure over time, including the use of audit, actuarial and legal professional services. In the longer term, however, this can turn into overall savings for the company. Milliman’s analysis shows that in the US between 2016 and 2020, single parent captives regularly outperformed commercial insurers in profitability.
Common structures for captive insurance companies
There are many ways of structuring a captive. Figure 1 compares a few common options.
Figure 1: Common captive structures
Direct vs. reinsurance captive insurance companies
Similarly to insurers, captives can also be direct (insuring the risk directly) or a reinsurance captive (taking the risk from another insurer, often in the form of a ‘fronting’ arrangement). These structures can often be useful in navigating regulatory restrictions in different jurisdictions. For example, if captives are not permitted to participate directly in certain risks, a company can effectively retain the risk using a reinsurance captive from a fronting insurer intermediary, as shown in Figure 2.
Figure 2: Reinsurance captive structure example
International domiciles of a captive insurer and the UK regime
It is worth noting that the domicile of the captive, each with its unique tax and regulatory environments, will have significant implications on the operation and feasibility of the captive. In 2024, the most popular domiciles (by number of captives) were Vermont (638), Bermuda (632) and the Cayman Islands (561). In the European region, more popular choices included Guernsey (197), Luxembourg (197) and the Isle of Man (94), according to Captive Review’s World Domicile Update 2025.8
While the specifics of the proposed UK captive regime will continue to be developed, HM Treasury’s captive insurance consultation response gives some insight into the future strategic direction of government.9 This states the government’s view that for the UK to be attractive to captive insurers, there should be:
- “Proportionately lower capital requirements for captive insurers;
- Reduced application and administration fees;
- A faster authorisation process; and
- Reduced ongoing reporting requirements, compared to those for insurers and reinsurers”10
Notably, the consultation affirmed that there is limited appetite for tax incentives to promote the new regime, stating that ‘the government remains of the view that tax incentives are not a necessary component of introducing a modern and competitive captive insurance framework.’11
Strong infrastructure is a key component to any successful domicile. Due to its well-established insurance industry, a UK domicile has access to a variety of service providers with deep industry expertise across claims, accounting, actuarial and legal services, which may provide competitive advantage.
Within the UK, Lloyd’s operates a captive syndicate model, under which companies may set up a Lloyd’s syndicate to issue policies, benefitting from Lloyd’s international licencing to issue policies as well as Lloyd’s financial strength rating.12 Compared to using a fronting insurer, this model may offer greater control over risk transfer and reduce reliance on a partner insurer (and potential increases of their fronting fees) but would require compliance with Lloyd’s oversight and capital requirements. At the end of 2024, there was only one confirmed captive syndicate under this model (see case studies).
Case studies: Captive insurance companies in practice
The following provide some examples of the use of captives in practice:
- In June 2024, Apollo launched a captive syndicate (1100) at Lloyd’s on behalf of a ‘major global client,’ the first under the Lloyd’s revised captive syndicate model.13
- The American Road Insurance Company (TARIC) is a captive ultimately owned by the Ford Motor Company that provides ‘a variety of coverages and services that support the sale and financing of Ford and its vehicles in dealerships throughout the United States and Canada,’ including insurances on extended service contacts and direct general liability.14
- The Los Angeles Unified School District (LAUSD) launched an insurance captive in June 2024, with backing by a panel of 30 insurance carriers. This structure provided quick car replacements to those who lost cars during the subsequent wildfires. The captive was also used to issue liability policies due to unfavourable market terms.15
- RVnGO, a recreational vehicle rental company, launched a captive insurance company to provide auto liability and property damage coverage to help reduce rental costs and provide a more streamlined insurance claims process.16
Other considerations surrounding captive insurers
To maximise the benefits of a captive structure, clear strategic goals should be established to guide decision making. The success of a captive will often depend on the strength of underlying risk management, including the ability to quantify risk, create alignment between risk management at the line one (frontline operational teams) and line two (risk management and compliance functions) levels and optimise risk through changes to practices or policies.
Captives are considered a long-term risk management option, as each year may experience volatility in results. Depending on the structure adopted, there may also be significant investment required in the setup and management of the captive. However, it is expected that the short-term capital cost would be compensated by the potential for longer-term accumulation of insurance profits, which would otherwise pay for insurer distribution and capital costs.
Managing risk through a captive, particularly if there is no insurer/reinsurer participation, may risk loss of expertise and exposure to key market signals and developments. As an example, in evolving areas such as cyber insurance, companies may have a high reliance on third-party expertise for understanding of system vulnerabilities, loss control and cyber incident response. This can be managed to some extent if there is some continued sharing of risk with the insurance market, such as through cession of higher excess layers. An examination of which covers to be accepted by the captive, and to what extent, can be examined holistically in a feasibility study.
1 Reeves, R. (15 July 2025). Rachel Reeves Mansion House 2025 speech. Gov.uk. Retrieved 9 October 2025 from https://www.gov.uk/government/speeches/rachel-reeves-mansion-house-2025-speech.
2 HM Treasury. (July 2025). Captive insurance – Consultation response. Retrieved 9 October 2025 from https://assets.publishing.service.gov.uk/media/686fc3f910d550c668de3e04/Captive_insurance_Consultation_Response.pdf.
3 Captive.com. (n.d.). The Early Days of Captives. International Risk Management Institute. Retrieved 9 October 2025 from https://www.captive.com/captives-101/history-of-captives/the-early-days-of-captives.
4 Meehan, M., Guerriero, K., & Bachler, R. (12 August 2024). Ten questions everyone’s asking about captives. Milliman, Inc. Retrieved 9 October 2025 from https://www.milliman.com/en/insight/critical-point-episode-56-ten-questions-about-captives.
5 Bank of England. (15 July 2025). Joint statement by the PRA and FCA on HM Treasury’s captive insurance consultation response. Retrieved 9 October 2025 from https://www.bankofengland.co.uk/prudential-regulation/publication/2025/july/captive-insurance-statement.
6 HM Treasury. (July 2025). Changes to the Risk Transformation Regulations – Consultation. Retrieved 9 October 2025 from https://assets.publishing.service.gov.uk/media/687637f339d0452326e28e9d/Changes_to_the_risk_transformation_regulations.pdf.
7 Captive.com. (n.d.). What is Captive Insurance? International Risk Management Institute. Retrieved 9 October 2025 from https://www.captive.com/captives-101/what-is-captive-insurance.
8 Newton Media Ltd. (n.d.). World Domicile Update – Domicile Index. Retrieved 9 October 2025 from https://newton.media/captive-review-world-domicile-update-2025/world-domicile-update-domicile-index.html.
9 HM Treasury. (July 2025). Captive insurance – Consultation response. Op. cit.
10 HM Treasury. (July 2025). Captive insurance – Consultation response. Ibid.
11 HM Treasury. (July 2025). Captive insurance – Consultation response. Ibid.
12 Lloyd’s. (2022). Establishing a Captive Syndicate at Lloyd’s. A guide for applicants. Retrieved 9 October 2025 from https://assets.lloyds.com/media/2968f00c-f7eb-4962-865e-10bbc5f34e2e/Lloyds-Captive-Syndicate-Guide-January-2023-Final.pdf.
13 Apollo. (3 June 2024). Apollo launches the first captive syndicate of the modern era at Lloyd’s [Press release]. Retrieved 9 October 2025 from https://apollounderwriting.com/apollo-launches-the-first-captive-syndicate-of-the-modern-era-at-lloyds/.
14 AM Best. (4 December 2024). AM Best Affirms Credit Ratings of The American Road Insurance Company [Press release]. Retrieved 9 October 2025 from https://news.ambest.com/PR/PressContent.aspx?refnum=35502&altsrc=2.
15 Richardson, M. (26 June 2025). Captive case studies: LAUSD’s response to wildfire devastation. Retrieved 9 October 2025 from https://captivereview.com/news/captive-case-studies-lausds-response-to-wildfire-devastation/.
16 Richardson, M. (19 August 2025). RV rental company launches captive. Retrieved 9 October 2025 from https://captivereview.com/news/rv-rental-company-launches-captive/.