Protected Cell Company

A stand-alone captive insurance company has to meet capital and solvency requirements and this has therefore generally been restricted to organizations with insurance premiums of €1,000,000 and above. To overcome this size restriction on the use of captive insurance and permit smaller organizations to benefit from the captive insurance market, Guernsey introduced legislation in 1997 to permit the use of a new type of company called a “protected cell company” (PCC).

The current legislation for PCCs in Guernsey is contained in The Protected Cell Companies Ordinance 1997 as amended by The Protected Cell Companies (Amendment) Ordinance 1998.

A protected cell company is a single legal entity, but the company is made up of individual “protected cells”. It has a “core” capital (the ordinary share capital provided by the owners). Each cell has its own additional capital (usually redeemable preference shares) provided by the client using that cell. Guernsey insurance regulations require the cells to maintain a minimum solvency of 18% of net premiums, but this may need to be greater to meet the risks to be covered within the cell. Dividends can be declared to distribute the profits from the cells’ underwriting performance.

The assets of one cell are statutorily protected from the creditor of another. Therefore different organizations can safely use different cells within one PCC.

The great advantage of this PCC concept is that it is an easy and cost-effective way for a smaller organization to take advantage of the captive insurance market.

Not only is the cost lower, but the amount of senior management time that needs to be spent in dealing with insurance matters can also be considerably reduced.

Dixcart is able to introduce suitable clients to a protected cell company specializing in captive insurance – Managed Risk Insurance PCC Limited (MRI). The capital for the company has already been provided, so that each client only has to provide the capital to cover the risks they place in their cell.

Each cell in the PCC is protected from any liability within another cell. In effect each cell is like a separate limited company, all under common management so as to reduce the costs, capital required, administration and senior management time.

As a general guide it is suggested that entities with a premium in excess of €250,000 could benefit from the use of this type of structure. Captive Insurance offers a real opportunity for small/medium size companies.

The use of Managed Risk Insurance PCC Limited is an easy and cost-effective way for a smaller organization to take advantage of the captive insurance market.