Skip to main content


Cells: Risk management building blocks

Captives have long been a valuable, flexible solution to meet business needs, and one type of captive is attracting increased attention: cells.

As businesses face uncertainty, risk volatility, and changing conditions in the insurance market, risk finance options are more important than ever. Captives have long been a valuable, flexible solution to meet business needs, and one type of captive is attracting increased attention: cells.

During what has been a challenging insurance market in most coverage lines, the number of new Marsh managed cell entities grew by 49% in 2021 — and double-digit growth is expected to be seen again for 2022. Property, cyber, professional liability, and general liability were the top coverages written in cell facilities formed during the past three years.

As risk-bearing entities, cells can support loss control programs, prefund losses, provide access to reinsurance, and retain profitable insurance business.

Advantages of cells

With many insurers holding firm on or increasing pricing, reducing capacity, and/or adding exclusions in certain lines over the past few years, many companies have explored alternatives for their risk transfer needs. Economic trends suggest businesses in 2023 will continue to see higher costs for goods and services, supply chain challenges, lower or even negative profit growth, and litigation.

Captives come in a variety of structures, from single-parent to group, and cells themselves exist in different forms. Cells are known in various domiciles globally as protected cell companies (PCCs), incorporated cell companies (ICCs), segregated account companies (SACs), and segregated portfolio companies (SPCs). All of them, however, have a common structure comprising a core entity with individual cells insulated from the liabilities of other cells. 

And all types of cells offer advantages in financing risks, including:

A cell captive is simpler to form than a standalone captive because the cell is part of an established entity. A cell eliminates the need for legal work to form the entity, and financial requirements are simplified. Additionally, it does not create another entity for the sponsoring organization to manage on an org chat. One way to think of a cell is like leasing space in an already constructed office building that has other tenants, compared to designing and constructing an entirely new building for a single tenant. It’s one reason some refer to cells as “rent-a-captives.”

With a cell, the necessary captive infrastructure to operate already exists. Therefore, cell captives can write risks quickly, typically within weeks of filing a business plan with the domicile regulator and providing capital.

In many cases, the capital requirements for a cell are less than those for a standalone captive. In some domiciles, the core capital of the larger entity may satisfy domicile solvency requirements, meaning owners of individual cells can supply lower amounts of starting capital, and scale that to meet underwriting needs.

As regulated insurance entities, cells have flexibility to write traditional or new forms of insurance. This can be particularly helpful to cell owners that need customized risk financing to protect their exposures or fill in gaps in their insurance programs. In addition to traditional coverages, Marsh managed cells are increasingly used for cyber risk, directors and officers (D&O) liability, affinity business (MGAs/MGUs), and insurance linked securities (ILS).

Standalone captives are proven tools for parent organizations seeking financial flexibility and lower risk transfer costs. But, standalone captives require time and resources to establish and maintain. They are not short-term solutions — they have capital commitments and ongoing operating expenses. Cells offer the same financial flexibility and risk transfer capabilities without the need for onsite board meetings or the creation of a subsidiary legal entity. As an organization’s risk needs evolve, so too can its approach to captive insurance. Cells offer both an easy set-up and exit plan. 

The Definitive Guide to Captive Insurance.

Your one-stop resource to understand the ins and outs of captive insurance.

Examples of successful cells

  • Clients from a variety of industries use cells to fund primary and/or excess layers of cyber risk.
  • One MGA uses a cell to reinsure a 10% quota-share of the book of business it underwrites, generating an anticipated profit for the MGA of over $1 million that would otherwise have been retained by the fronting carrier.
  • A large real estate client used a cell to direct write property coverage under the Terrorism Risk Insurance Protection Act (TRIA) with 100% retrocession of risk to a reinsurance panel. Use of the cell, rather than its commercial property program, saved the company approximately $800,000 in annual premium.
  • Another client uses a cell to formally retain a high deductible and fill in a hole in the excess tower.
  • Within insurance linked securities (ILS), clients use cell structures as transformers to access third-party capital.
  • D&O liability, in particular Side A, is another challenging risk for public and private companies that cell captives can be especially suitable for writing. Cells do not have a subsidiary affiliation with their owners that, in certain circumstances, could complicate a standalone captive from indemnifying directors and/or officers of the parent company. A new Marsh-owned cell facility in Delaware, opened late last year, expands the opportunity for companies to fund Side A D&O liability risks.

Integrating a cell into your risk management program

If your organization is interested in using a cell, a few questions to consider include:

  • Exposures and risk tolerance: Does it make sense for your organization to retain more risk? Is your organization able to fund more of its own risk?
  • Captive logistics: How important are speed and cost to your organization? Is it willing to pursue a longer timetable to establish a standalone captive solution, or does it need to integrate a risk finance solution quickly? Can the organization support the ongoing requirements of a captive, or is it interested in reduced time and management expectations via a cell?

For more information about captive insurance, please contact your Marsh representative.

Related insights