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Senior figures in the insurance industry are calling on the UK to restart work on a potential new market worth billions of pounds as part of a drive to boost competitiveness.

Executives have written to Chancellor Rachel Reeves calling for a consultation about the creation of a captive insurance regime in the UK, according to a copy of the letter seen by Bloomberg. The move would allow London to compete more effectively with offshore centers like Bermuda and Guernsey.

Captive insurers are entities set up by companies or public institutions to provide their own insurance. Supporters say they enhance risk management and can be additional to external insurance cover, while critics warn that they can concentrate losses.

Current UK rules — governed by the Solvency II capital regime — are too restrictive, driving business offshore, according to the letter, sent by AXA XL CEO Sean McGovern, who chairs the London Market Group, which represents London insurance businesses, and Christopher Lay, chief executive officer of Marsh McLennan UK.

That means the UK is missing out on a market that’s estimated to reach $161 billion globally by 2030, the letter said. The US, France and Italy have all introduced regimes to bring captives onshore, it adds.

The Conservative government had promised to consult on creating a light-touch regime for captives to bring more business into London. Industry figures are hoping Labour will resurrect the plan, potentially at October’s Budget.

“A UK captive framework could deliver a major boost to the UK and London insurance market and be a tangible example that the UK is open for business,” the letter said.

Treasury officials are looking at the topic and aim to provide more details soon, according to a person familiar with the matter. The Treasury did not comment.

Photograph: The City of London with a view of the Bank of England. Photo credit: Betty Laura Zapata/Bloomberg

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