Guernsey: Key To The Cell – PCC And Cell Formation In Guernsey

Last Updated: 11 March 2013
Most Read Contributor in Guernsey, September 2016

Ivy Jermyn-Buckley and Marian Fenton of AIG – which has a PCC established in Guernsey since 2007 – share their knowledge of PCC and cell formation in Guernsey.

Today, as the industry continues to develop and evolve, the Protected Cell Company (PCC) structure is receiving a new focus. Industry statistics reported an increase of 60 protected cells and four incorporated cells in Guernsey alone in 2012. PCC's can trace their origin to historical contractual cell structures. The need to ring fence assets and liabilities by statue rather than by contract gave rise to the development of the PCC concept, which originated in Guernsey and was introduced into Guernsey law in 1997. The PCC itself is a single legal entity made up of a 'core' and any number of cells. The cell is not a separate legal entity, and therefore it cannot transact with another cell within the same PCC or the PCC Core, but is legally separated from other cells in the PCC and can be owned by the PCC owner or by a third party. The assets of one cell are not available to shareholders or creditors of another cell or to shareholders or creditors of the core.

Who would establish a PCC?

A PCC is often set up by insurance or reinsurance companies or brokers wishing to offer a facility to their existing clients or to others who otherwise would not have access to such a facility. Alternatively, individual companies may wish to have their own PCC to manage their own risks and use the PCC Cell structure to segregate these risks by territory, affiliate or even profit centre.

Who would establish a cell?

Cells are usually set up by companies who are trying out the captive concept for the first time and do not, as yet, want to commit or are in a position to commit, to creating their own standalone vehicle with the associated costs and management time that goes with doing so. The advantages of using a cell are numerous:

  • Allows smaller companies to have access to the captive market as the capital required is lower than that required for a standalone captive.
  • Start-up and operating costs are lower due to the sharing of services provided through the PCC concept. As the cell is not required to have its own board of directors, instead being managed by the board of the PCC, this reduces the sponsors' time and management involvement needed.
  • Protection by statute against third party claims through the PCC legislation.
  • Set up of a cell (see table) is easier as the framework is already in place through the PCC. It is also easier to exit the cell than a stand-alone captive.
  • Provides flexibility – can segregate run-off business from active business or segregate and better manage the risks of a subsidiary which a group may wish to divest of at some future point.

What capital is needed to form a cell within a PCC?

The PCC owner has already contributed the required minimum capital for the legal entity. The cell, similar to a traditional captive, will still have to meet the required margin of solvency. For general insurance in Guernsey this is based on the greater of 18% of written premium (up to £5m, and 16% thereafter) or 5% of loss reserves as provided for in the Insurance Business (Bailiwick of Guernsey) Law, 2002. Any risk gap (the difference between exposure, capital and net premium) is generally required to be covered. However, if the premium and capital fully fund the cell's exposure, i.e. no risk gap or a very low risk gap, a solvency waiver may be obtained. This will be dependent on the attitude of the regulator in the PCC jurisdiction.

Some PCC owners may allow the risk gap to be covered by the core assets of the PCC. Usually a further premium will be charged for this, some form of security will be required and a "recourse"1 agreement will be put in place.

In Guernsey, there is no automatic recourse to the core assets and these are protected from creditors of the PCC who are not creditors in respect of the core. Some domiciles do allow automatic re- course to the core under certain conditions, such as Malta captives writing non-compulsory business.

1 A recourse agreement is a written agreement between a PCC and a Creditor which provides that protected assets may be subject to a liability owed to a creditor.

Setting up a PCC in Guernsey

A company can be incorporated as a PCC or an existing company can be converted into a PCC, either way with the prior consent of the regulator. The procedure for incorporation of a PCC is almost the same as for a standalone insurance or reinsurance company.

  • An application including a business plan and financial projections is submitted to the regulator for approval;
  • On receipt of regulatory approval, the company is formally incorporated and registered with the relevant authorities;
  • A meeting of the directors is held to issue shares, agree policies, governance structure and the insurance programme, and to appoint:
  • Auditors
  • Company secretary
  • Bankers
  • Managers
  • A licence will be issued by the regulator to allow the company to commence trading per its business plan once the regulator receives a copy of the applicant's certificate of incorporation and Memorandum and Articles of Association (which must state that it is a PCC), confirmation that the share capital has been received and/or that letters of credit and subordinated loans are in place.
  • The name of the PCC must include the expression either "Protected Cell Company" or "PCC".
  • Core shares are issued to the PCC investors granting voting and distribution rights over the core capital only.

Steps in the creation of a cell within a PCC

  • Initial meetings will be held between the prospective cell owner and the manager and or owner of the PCC to discuss the feasibility of owning a cell and insuring certain risks. Typically the owner of the PCC will also be the manager. The structure of the (re)insurance programme is discussed and an outline business plan drawn up for submission to the PCC underwriting committee.
  • Assuming the programme is agreed in principal with the PCC underwriting committee, the PCC owners will work with the sponsors of the cell to complete all documentation needed to submit an application for a (re) insurance licence to the regulator.
  • It is important to have an early meeting with the regulator to introduce the cell sponsors and discuss the business plan for the cell. This meeting is an opportunity to discuss any possible areas or issues that may cause delay or prevent the cell being formed. Those holidng 'prescribed positions' as defined by the Guernsey regulator for the cell will be required to complete a personal questionnaire which will provide evidence of their suitability for the proposed role.
  • The questionnaire along with the final business plan (both narrative and financial projections) and cell application form will then be formally submitted to the regulator for approval.
  • The application process normally takes up to eight weeks.
  • Once approval has been obtained, the PCC owner will then simply resolve to create a new cell. Cellular shares in the form of redeemable preference shares are issued to the cell owner. These shares have limited status with no voting rights and allow dividends to be paid.
  • The cell is registered with the relevant authorities before becoming active.
  • The prospective cell owner is required to enter into a cell management agreement with the PCC board and will be bound by the Memorandum and Articles of Association of the PCC.

Use of PCCs

The continued growth of protected cells in Guernsey is a strong endorsement of both the domicile and the cell concept. We expect this trend to continue in 2013 as an alternative to a standalone captive, providing significant cost and capital savings.

IVY JERMYN-BUCKLEY - underwriting manager for AIG Insurance Management Services – European operations with responsibility for all underwriting aspects of managed captives and new business prospects. She is a chartered insurer with more than 20 years' experience of several insurance and reinsurance markets.

MARIAN FENTON - is the regional director at AIG Insurance Management Services – European operations with responsibility for financial and operational oversight. Marian is a chartered accountant with almost 20 years' experience in the Irish domestic and International insurance industry.

Originally published by Captive Review, February 2013

For more information about Guernsey's finance industry please visit

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.