AM Best expects the UK consultation paper that proposes a framework for single-parent insurance captives will create a regime that compares well to other established captive domiciles.

In the latest commentary, Best said: “The flexible capital requirement framework, if delivered, is expected to give the UK a competitive proposition, but for parent companies, taxation is expected to be a key consideration.”

UK captives must face standard UK corporate tax rates while some of the more established domiciles, including Bermuda and the Cayman Islands, benefit from comparatively lower rates.

Meanwhile, Lloyd’s is already “actively nurturing the development of a slew of start-ups that, in underwriting terms, are pure play reinsurers”, according to an opinion piece by Adam McNestrie, editor-at-large, Inside Insider and Insurance Insider US.

He referred to sources who suggest there are eight to ten syndicates at various stages of the Lloyd’s pipeline, as “the corporation is clearly getting traction with both cedants and capital providers.”

Mr McNestrie suggests this is happening “at a time when no one would even dream of trying to launch a Bermuda reinsurer” in his article which is headlined: “Reinsurance start-ups: the Bermuda desert and the Lloyd’s hothouse”.

Best said the UK captive regime outside of Lloyd’s could be a preferred captive domicile for UK companies.

The report spoke of the operational efficiencies that may be derived from UK proposals for a single type captive writing both direct insurance and reinsurance business.

The commentary said: “UK captives will be able to write non-life business alongside some types of employee benefits business, and since the latter can only be written on a reinsurance basis, such a captive would not be classified as a composite.”

In AM Best’s view: “The ability to write both direct and reinsurance business will afford greater flexibility to UK captives as some domiciles require separate licences for these businesses.

“For UK corporates, the proposed captive regime could mean keeping risk management and governance within the country and avoiding offshore governance complexities. The UK captive regime will benefit from the country’s well-developed regulatory framework and insurance ecosystem.”