Can a Protective Cell Company Give You More Control Over Rising Insurance Costs?

Can a Protective Cell Company Give You More Control Over Rising Insurance Costs?

Insurance premiums are rising, and based on current global challenges, inflation and instability in the market, this may continue over the course of the next few years – some sources are even reporting an upcoming super cycle for insurance premiums.

This being said, however, we continue to remind our clients that there are several actionable strategies we can put in place to counter these insurance dilemmas.

In an earlier post, I wrote about Captive Insurance: an alternative strategy that you can consider for your insurance needs. Captive Insurance is where the insured produces a ‘captive’, which in turn is set up to be insured against your company’s (or your affiliate companies’) specific risks.

However, as mentioned, despite its potential benefits, Captive Insurance has a higher barrier to entry and as such requires significant investment. An alternative (and often far less costly) strategy to Captive Insurance is the production of a Protective Cell Company (PCC).


protected cell company


Introducing the Protective Cell Company (PCC)

Originally developed in Guernsey in 1997, the main purpose of a Protective (or Protected) Cell Company (PCC) is to help provide a solution for organisations that want to take advantage of risk management solutions offered by traditional single parent captives but do not want to establish captives of their own.

A PCC is a form of company consisting of individual parts, known as cells. Each cell has its own designation and is completely independent of other cells and of the company’s core – all while the assets and liabilities of each cell are kept and accounted for separately. A PCC can have unlimited cells.

To put it simply, a PCC is similar to a honeycomb where the cells are all individually protected within the beehive.

The advantages of a PCC include:

  • Assets of each cell are statutorily segregated in order to ensure that a claim against a single cell cannot be covered by the assets of another cell
  • Considerable cost savings and better efficiency of managing certain risks
  • No initial capital requirement
  • No directorships
  • A cell is quicker to set up and/or close


Who are Protective Cell Companies for? 

A PCC is often used by companies that are looking to mitigate their risk by creating separate entities – or cells – within a group structure that helps “fence” their risk and liability to certain assets or cells. This also allows certain companies to take advantage of specialist reinsurance markets that might not be accessible otherwise.


protective cell company


How does a Protective Cell Company work?

A PCC differs from a conventional company in that it is a single-core company with an unlimited number of cells. This company is governed by a single board of directors who are responsible for the management of the PCC as a whole.

Compared to a captive, PCCs can be a cost, capital and time efficient way to gain more control over your insurance costs and limitations. Plus, the core manages the majority of the governance and regulatory requirements. As such, by establishing a PCC, regulatory burdens can be lesser compared to standalone captives.

The use of a PCC also has the potential to enhance the competitiveness of the financial services industry, making it easier to structure investment activities at the fraction of the cost of typical captive strategies. Where a PCC differs from an option like a rental captive is that it also includes statutory protection, which is not available in the case of a rental captive.

It is important to understand that PCCs have a limited pool of assets that are accessible for recourse to the creditors of a particular cell. It is also worth noting that the assets of protected cells are not to be used to pay any expenses of other cells, other than those attributable to each protected cell.



Interested in finding out how PCC can work for you?

In partnership with the Steadfast network, we work with clients to establish captives in Guernsey, which is recognised as a hub for financial insurance companies around the globe.

PCCs may seem complex but can be beneficial part of your insurance and asset allocation strategy.

If you are interested in discussing the strategies for a PCC and how it can be beneficial for your company, feel free to contact us and find out more. As business insurance brokers with a wealth of experience in both traditional and innovative insurance solutions, we’ll be more than happy to help.

If you are looking for more alternatives, keep an eye on my next post where I give a rundown about discretionary trusts and how their frameworks can be an alternative for those seeking to take control of their own risk financing plan by either pooling together risk with others or forming your own facilities.

General Advice Warning: This advice is general and does not take into account your objectives, financial situation or needs. You should consider whether the advice is appropriate for you and your personal circumstances. Before you make any decision about whether to acquire a certain product, you should obtain and read the relevant product disclosure statement.

Tony Venning, Crucial Insurance and Risk Advisors, ABN : 93 166 630 511, AFSL : 451450

This article originally appeared on Crucial Insights and has been published here with permission.

Advisr does not provide advice and does not hold a financial service license (AFSL). All information above has been provided by Tony Venning.

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Tony Venning

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