Protected Cell Insurance
The Protected Cell Company “PCC” is a
relatively simple concept in that the structure consists of a single parent
company – being
the PCC, within which there are legally segregated
sub-divisions, which are called "cells".
 Click here for larger image
But, before describing the intricacies of a PCC it is necessary to briefly
explain the background which gave rise to this type of structure.
These entities originated in Guernsey, specifically by means of The Protected
Cell Companies Ordinance Act of 1997. Other offshore jurisdictions have followed
the path of Guernsey, including the Cayman Islands with its Segregated Portfolio
Companies; Bermuda (which passed the New Providence Mutual Ltd. Private Act
allowing a PCC structure for this type of entity); Mauritius (which approved
The Protected Cell Companies Act of 1999 [amended in 2000]); and St. Vincent
and The Grenadines with their International Insurance (Amendments and Consolidation)
Act of 1998 which allows "protected premium accounts" introducing
elements of the PCC.
Vanuatu has The Protected Cell Companies Act No. 37 of 2005 which in our opinion
is arguably the most modern and up to date version of PCC legislation. Click
here for a copy of the Act
The operational and business flexibility offered by PCC’s can in many
circumstances facilitate trade, capital flows, legitimately help reduce high/prohibitive
tax burdens on business or even assist in fulfilling people's natural and legitimate
desires for asset planning and protection.
Protected Cell Companies are a welcome arrival for businesses that might otherwise
have gone without insurance because of prohibitively expensive premiums or,
where insurance proved virtually impossible to get in the general insurance
market and if available, often the cover contains inequitable terms restricting
the scope of cover rendering any such insurance virtually ineffective.
In circumstances described above, until the introduction of PCC legislation
there remained little choice but, to arrange insurance via a rent-a-captive
scheme, over the (more costly) incorporation of an in-house captive insurance
company.
Commercial Pacific Insurance Ltd’ through PCC legislation can provide
alternative risk management solutions for clients who might wish to take advantage
of the benefits of managing their own insurance risks, thus utilizing expenditure
and profits in the most efficient way.
In most cases, where insurance is sought for commercial purposes, premiums
are usually tax deductible. The further positive affect is that any earnings
on unclaimed premiums are put to the account of the cell thus, increasing the
cell’s value. As Vanuatu is free of income tax a cell’s earnings
can roll up gross, and be invested along the desires of stakeholders while
remaining available to fund insured contingencies for future claims.
In just about every case, insurance policy contracts can be tailored to meet
the specific requirements of a cell’s key objectives without restriction
ie: -
 Life Insurance (offshore) – free of estate duties; |
(estate planning) |
| High Value - Low Risk Asset; |
(utilization of contingent funds) |
| Contingent Fund Building; |
(fund investment) |
| Tax Deductible Premiums |
(in most cases) – Tax Free Earnings |
A Protected Cell Company, or PCC, can be thought of as being a standard limited
company that has been separated into legally distinct portions or cells.
The number of cells that a PCC can have is in theory, unlimited
Each cell is an independent entity and is allocated its own assets (the cellular
assets). The revenue streams, assets and liabilities of each cell are kept
separate from all other cells so that neither cell is affected by the business
or operations of another or, or by the PCC itself.
Cells are not legal entities in their own right, but are legally independent
and separate from the other cells. The only legal entity is the PCC, which
carries on all the business and operations on behalf of any cell.
The operations or business of a cell or, group of cells, are dependent of
the purpose of a cell’s formation and the desires of stakeholders.
Each cell is identified by a unique name, and the assets, liabilities and
activities of each cell are segregated from the others. If one cell becomes
insolvent, creditors only have recourse to the assets of that particular cell
and not to any other.
In the case of insurance, the cellular assets would consist of any insurance
premium and earnings on that premium, held for that particular cell against
a particular risk –and- the cellular liability would be the sum insured
value covered by the insurance policy issued for the premium.
The operational and business flexibility offered by PCC’s can in many
circumstances facilitate trade, capital flows, legitimately help reduce high/prohibitive
tax burdens on business or even assist in fulfilling people's natural and legitimate
desires for asset planning and protection.
Some of the most obvious benefits of using a cellular structure are: -
Insurance:
Affordable alternative insurance solutions tailored to meet your objectives – including
self managing ones own insurance requirements - isolating low risk structures
from high risk structures.
Asset Protection:
PCC’s can provide a sophisticated form of "asset protection" in
protected cells, which are not affected by any outside or unrelated claim from
creditors and/or a liquidator and/or similar entity. Assets of a cell can not
be attacked in circumstances where the cell has no direct involvement in a
matter giving rise to a liquidator’s actions.
Investment:
A PCC can provide a platform to manage one's own assets and investments, which
in the context of world stock markets today may prove more profitable than
those selected by professional managers of investments. A protected cell
company may pay a dividend (a "cellular dividend") in respect of
cell shares and earnings on those shares.
Success Contingencies:
A PCC can arrange for insurance cover to meet claims for a success fee. This
is particularly beneficial where executive remuneration is dependent on the
success of a particular transaction. This type of insurance is similar to “prize
insurance” for such things as hole in one prize cover etc’. This
can assist companies and their senior executives meet their financial goals
and objectives without unnecessary attention.
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For further information please contact Commercial Pacific Insurance Limited
by returning to our home page and obtaining our contact details or, alternatively email
us with your enquiry by clicking here
The Manager "Captive Bureau"
Commercial Pacific Insurance Ltd'
Level 1 Anchor House
Lini Highway Port Vila Vanuatu
Ph: Int: 678 - 28062
Fax: Int: 678 - 28069
Email: cpi@vanuatu.com.vu
The content of this page is intended to provide a general guide to the subject matter.
Specialist advice should seek about your specific circumstances.
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