Companies set up their own captive insurance units to insure their company directly, cutting out outside insurers.
Companies are increasingly favouring using captives as commercial insurance becomes more expensive.
Most FTSE 100 and Fortune 100 firms own one, industry sources say, but if the company is UK-based the captive insurance unit will be based overseas for now.
Several other countries, however, allow the establishment of captives, including member states of the European Union, which Britain has left.
“The best experts sit in London, but the UK does not actually have any captives within our jurisdiction. Here is a clear opportunity for the UK to grow its market,” Wagstaff said.
Insurance may no longer be the “bright jewel in the crown” of UK financial services that it once was given a decade of “stagnation” in the market share of London’s commercial insurers, Wagstaff said.
“We don’t have the right regulatory environment,” she told a Westminster Business Forum event.
Captives could be set up under current rules, but the London Market Group is talking to the Bank of England’s Prudential Regulation Authority, which regulates insurers, about ensuring that the process would be quick.
A slow process would act as a deterrent, Wagstaff said.
Regulators in Britain therefore need to rethink how they apply strict retail consumer safeguards in a commercial market used by large professional buyers who don’t need the same “one size fits all” protections, she said.
“The biggest change that we will be looking for is less about rules and more about behaviours and culture,” Wagstaff said.
Insurers want regulators to use Britain’s departure from the European Union as an opportunity to make insurance capital rules inherited from the bloc more flexible.
The UK finance ministry, which is expected to set out proposed changes in a public consultation paper later this month, has said that captive insurance is an area ripe for further work.
“I hope that we would see that evolution in the way insurance and reinsurance is offered to big corporates,” UK financial services minister John Glen said last month.
(Reporting by Huw Jones and Carolyn Cohn; Editing by Susan Fenton)