Each cell is only obliged to hold capital needed to protect its risks, while the own funds requirements apply to the PCC as a whole.
Protected Cell Companies
Malta is the only EU member state with Protected Cell Company (PCC) legislation, which provides numerous advantages compared to stand-alone insurance intermediaries. The PCC has a single board of directors that takes responsibility for the transactions within the core and each of the cells, and for the statutory and regulatory compliance and corporate governance requirements of the company. The board may delegate the management and administration of a cell, or parts thereof, to a cell committee which may include representatives of the cell owner.
A protected cell company (PCC) operates in two parts – the company core and the cells. The core part comprises all non-cellular assets including the company’s core share capital, investments, liabilities and so forth.
The core share capital may be the minimum required at law or it may be larger depending on its activities. The core does not need to take any of the insurance risk itself, but must be solvent at all times based on the business written by the whole company, including the cells. A PCC has within itself one or more “cells” for the purpose of segregating and protecting the cellular assets of the company from those of other cells or the assets of the core itself.
Each shareholder of a cell receives its own dividend stream. The core and its cells are to be treated as one legal entity, as the cells do not have separate legal personality. It is only in the case of tax purposes that each cell is treated as a separate entity. Once established a PCC can form cells for third parties. Cells contract through the PCC which acts on behalf of the cell.
A protected cell transacts insurance business through the licence held by the PCC. The PCC has a single board of directors which takes responsibility for the transactions within the core and each of the cells and for the statutory and regulatory compliance and corporate governance requirements of the company as a whole. The board of directors of the cell company has ultimate responsibility for all cells and cellular assets. The board may delegate the management and administration of a cell, or parts thereof, to a cell committee which may include representatives of the cell owner.
The assets of any one particular cell are only available to the shareholders and creditors of that cell – creditors of another cell have no recourse against them. However, in the event that the cellular assets of one cell have been exhausted, the company’s core assets may be secondarily liable to satisfy any cellular liability of one of its cells.
Jatco always maintains high compliance standards with internal control functions, which are reviewed and updated regularly in line with market regulatory requirements. This is a key element that gives strength to our processes. Jatco’s establishment in the Maltese insurance distribution market since 1987 ensures a high level of expertise and knowledge in the market. By using the PCC structure, we are able to offer our international prospective clients multiple advantages.
The PCC Structure
The Core
Jatco Insurance
Brokers PCC Ltd
The benefits of using a protected cell are as follows:
Lower Capital Requirement
Lower Running Costs
Protected cells also benefit from lower running cost compared to stand-alone companies since there is no need to set up a separate company. Owners benefit from simpler administration and shared overhead costs.
Lower Risk
The risks within each PCC cell will be legally segregated from other cells.
Direct Broking into Europe
PCCs and their cells licensed in Malta can access EU markets through single-passport route, thus avoiding fronting arrangements.
Faster Authorisation Processes
The application process for a cell is less demanding because the management of the PCC is already known to the regulator.
First Experience
Entities that have not had a great deal of exposure to the business of insurance can benefit from the experience of the cell company in regulatory issues, as well as the day-to-day running of an insurance company.