During the past decade Guernsey has built a reputation as a world leader in the provision of innovative insurance solutions through the use of cell companies.
Pioneering With The PCC
This year (2007) is the tenth anniversary of when Guernsey introduced the Protected Cell Company (PCC) concept to the world. By the end of 1997 the Islands international insurance sector boasted 6 PCCs and 14 cells but by the close of 2006 this had risen to 68 PCCs and 243 cells. During this period the structure has become hugely successful as an alternative vehicle for many different financial services solutions and, as such, jurisdictions across the globe have followed the Islands lead. Guernsey though has been advancing the development of the cell by amending its PCC legislation to add further flexibility to the use of the structure.
Using The PCC
The Island developed the PCC in response to the needs of its pre-eminent captive insurance industry.
In a conventional company all of the assets and liabilities are linked, giving rise to a risk that the failure of one insurance programme could lead to the loss of assets related to another. A PCC is one company made up of a core and individual cells. The core covers liabilities unrelated to a specific cell and may make good shortfalls in cellular assets once those assets have been exhausted. The segregation though ensures that no claim against one cell will be covered by the funds furnished by another.
Therefore with a PCC an insurance manager can, in a single company, write various parts of business into separate cells. Participants in rent-a-captive schemes can be assured that their assets and liabilities will be separated from those of other members. In addition, a PCC can also be used as a vehicle for access to the reinsurance market.
The Innovative ICC
Guernsey adopted the innovative Incorporated Cell Company (ICC) structure in 2006 and by the end of that year the first insurance ICC had been formed.
An ICC has cells like a PCC but they are separately incorporated and distinct legal entities. This provides an extra layer of protection for investors who may be concerned about the legal standing regarding ring fencing of liability in PCCs, particularly in foreign courts where the concept does not exist.
It is also a particularly flexible structure, an attraction that has even more resonance in Guernsey where the legislation has been tailored so that the restructuring provisions of PCCs and ICCs include:
- An ordinary company can convert to a PCC or ICC
- A PCC can convert to an ICC
- An ordinary company can convert into an Incorporated Cell (IC) and become part of an ICC
- An IC can leave the umbrella of the ICC and convert into an ordinary company
- An IC can be transferred between different ICCs
- Two ICs can quasi-amalgamate
- Share capital can be issued in respect of the core and cell capital in respect of individual cells
- Individual cells can be wound up without prejudicing the healthy parts of the structure
Guernsey is committed to remaining at the forefront of cell company development, enabling companies in the Island to provide clients with the broadest range and most innovative insurance solutions.
For more information about Guernsey's finance industry please visit www.guernseyfinance.com.
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