Dr. Matthew Bianchi describes how Malta has led the field in allowing Protected Cell Companies to flourish.
P
rotected cell companies (PCCs) and incorporated cell companies (ICCs) have become synonymous with Malta’s dynamic insurance regulatory framework. Malta is to date the only fully fledged EU member state to allow for the licensing and establishment of PCCs.
The PCC regulations provide for the creation of re/insurance, insurance management and broker cells within the PCC. The assets and liabilities of each cell in a PCC are segregated from each other as well as from the assets and liabilities of the company. The PCC, however, remains a single legal entity at all times.
The attractiveness of a PCC arises from its ability to segregate assets
and liabilities in distinct cells, allowing the board of a PCC to establish a multiplicity of underwriting books within the company, with each cell owner at all times retaining full protection of their assets from any unforeseen financial problems of other cells or the core. The possibility of having each underwriting book and profits beneficially owned by the promoters of each cell has been the key factor to the rapid growth of the PCC sector in Malta.
Currently, there are six licensed PCCs in Malta, five of which hold an insurance business licence and one with an insurance management licence.
Assuming Solvency II requirements become applicable to the PCC as a
single entity rather than in relation to each cell within the structure, PCCs will be able to offer prospective cell owners the possibility of writing business in an environment comparable to that of an incubator, where expert management conversant with the Solvency II requirements is readily available.
The board of directors of the PCC would in fact be responsible for the risk management strategy of the company as a whole. This common approach to corporate governance would allow efficiencies to be created whereby new cells would be able to tap into a common pool of knowledge, expertise and specialist administration by simply establishing a cell without the need to incur the cost of training staff or hiring experienced individuals.
Much of the success of PCCs as gateways to the insurance market in
the Solvency II era will also depend on the degree of sophistication of the internal management structures put in place.
The ICC regulations introduced the concept of cells being incorporated as companies. An incorporated cell is a limited liability company with a separate legal personality. It is not a subsidiary of its incorporated cell company solely by virtue of the fact of it being an incorporated cell of its incorporated cell company. To date, no ICCs have been established in Malta.
Dr. Matthew Bianchi is the secretary general of the Association of Insurance Brokers and of the Malta Insurance Managers Association. He can be contacted at
Mbianchi@jmganado.com
September 2011 | INTELLIGENT INSURER | 63
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