Frequently Asked Questions

What is a PCC?

A Protected Cell Company (“PCC”) is a single legal entity comprised of a core, and a number of segregated parts, or “cells.” A PCC is formed by a sponsoring entity. The sponsor manages the PCC through a Board of Directors and provides minimum regulatory and operating capital (the “core”). Under the applicable laws governing PCCs, this structure creates a legal segregation of the PCC’s assets and liabilities into a number of different cells and a central core. Each cell is completely independent and separate from the other cells, as well as from the core of the company. The undertakings of one cell have no bearing on the other cells. Each cell is identified by a unique name, and the assets, liabilities and activities of each cell are ring-fenced from other cells.In a PCC, as a general matter, creditors of a particular cell only have recourse to the assets of that particular cell and not to any other cell or to the PCC core, subject to the satisfaction of all required conditions. A PCC captive is a licensed insurance and/or reinsurance company organized and regulated pursuant to the insurance/captive law of its domicile.

Who is a PCC suitable for?

It may be an ideal solution for:

  • An organization too small, based upon premium spend, to form its own single parent captive.

What are the similarities between a traditional Captive and a PCC Cell?

A traditional captive and a PCC cell operate in a very similar way:

  • Both a captive and a PCC will be licenced insurance or reinsurance companies, and will be subject to all applicable insurance laws, rules and regulations;
  • Both a traditional captive and a PCC cell have the potential of providing similar advantages to its shareholders, such as cost effective risk-financing vehicle; reduced overall insurance costs by retaining insurer profits and reducing overhead; access to the reinsurance market; cover for uninsurable or “difficult to place” risks; flexibility in program design; and optimization of risk transfer and risk retention.

What are the Differences between a traditional Captive and a PCC Cell?

While a traditional captive and a PCC operate in a very similar way, there are some differences between the two including:

  • The risks within each PCC cell will be legally segregated from other cells. In a captive all business is “co-mingled”.
  • The cost of a PCC Cell to a shareholder is likely to be less than the administration costs associated with owning a captive;
  • The interests of the owner/sponsor of the PCC do not have to coincide in all areas with those of the shareholders of each PCC Cell;
  • A PCC cell will typically require less of a time commitment from the shareholder than a captive, as the Board of Directors of the PCC and its captive manager typically provide the majority of administrative and management activities. These economies of scale can generally produce a lower operating cost to the shareholder.