Modern Protected Cell Companies Come in all Shapes and Sizes
The traditional lines associated with cell utilization have begun to blur. There has been growth in the number of captive domiciles offering Protected Cell Company (PCC) or Segregated Cell legislation as well as in the number of sponsored entities available. While PCCs have traditionally been utilized by small to midsize companies, it is now common to see large multinationals use a PCC in their risk management strategy.
Benefits that have attracted midsize organizations to PCCs in the past include:
- Ease of implementation/administration.
- Lower cost from shared services and potentially lower premium tax.
Today, we are seeing organizations of all sizes using cells in a variety of different ways for risk financing and program and profit optimization. In addition to customary P&C risk retention, we have seen an increase in clients utilizing PCC in:
- Gaining access to the global reinsurance market to obtain specialty coverages with significant policy limits using a cell. If structured properly and risk is 100% reinsured, capital is typically not required.
- Accessing alternative reinsurance coverage through capital markets’ investors, using insurance linked securities (ILS) as a source of fully collateralized risk transfer.
- Facilitating participation in customer insurance programs. There are a variety of ‘customer insurance programs’ integrated into client product or service offerings. A PCC can act as a reinsurer to the program front, thereby allowing the company to participate in program risk to potentially capture underwriting profit and investment income.
- Seeking the risk financing benefits of a single parent captive, but unable to own an entity or subsidiary company.
- Wishing to achieve optimal program structure without creating a new entity, which can be a lengthy and challenging process.
- Using PCCs in other domiciles due to potential tax mitigation or underlying domicile-specific benefits (i.e., Malta for direct writing in the EU or US domiciles for access to TRIPRA) when they already have one or more single parent captives.
We believe growth in cell utilization will continue as more domiciles implement PCC/Segregated Cell regulations and organizations seek out the flexible structure and optimized risk retention strategy a cell can offer. Marsh Captive Solutions offers a range of cell solutions and has established facilities in four domiciles including Mangrove PCCs in the Isle of Man, Malta, and Washington, DC, and Cerulean Re SAC Ltd in Bermuda to support this growth.