do you want to achieve any of these? · 2013-03-16 · solution: a protected cell captive pcc cell...
TRANSCRIPT
DO YOU WANT TO ACHIEVE ANY OF THESE?
The recent turbulence in the financial
markets has sent shock waves through the
business community. The troubles faced
by the likes of AIG in recent months have
caused consternation in the insurance
industry. Buyers of insurance are now
obliged to give even greater consideration
to the counterparty risk of paying premiums
to a third party today in anticipation of
return cash flows in the future. Increasing
retention levels and a review of current
insurance arrangements are likely to feature
prominently on all board room agendas.
Many organisations may be faced with an exposure they wish to insure but are unable to secure cover in the conventional market or they may be concerned that their risk management efforts are not being rewarded in the premiums quoted. Consideration of risk versus reward may prompt organisations to investigate whether to insure their own risk.
A Cell within a Protected Cell Company can provide a solution to these issues.
The PCC legislation has encouraged low cost access to captive solutions that assist those organisations who are not yet able to or do not wish to establish their own fully fledged captive insurance subsidiary.
SOlUTION: A PrOTECTED CEll CAPTIVE
PCC CELL
DEVELOPCUSTOMER INSURANCE REVENUES
FINANCEUNINSURED
RISKS
REDUCEYOUR RELIANCEON COMMERCIAL
INSURANCE
KEEPHOLD OF
YOUR CASH
BUCKTHE HARDENING
MARKET
INCREASE DEDUCTIBLES
ACCESSREINSURANCE
CAPACITYDIRECTLY
Willis Limited, Registered number: 181116 England and Wales. Registered address: 51 Lime Street, London, EC3M 7DQ.A Lloyd’s Broker. Authorised and regulated by the Financial Services Authority. 7065/03/09
WHAT IS A PrOTECTED CEll COMPANY (PCC)? A PCC is a single legal entity whose assets are segregated and protected within one or more cells of the company. Willis Management (Guernsey) Limited manage a number of PCC’s including two sponsored facilities, Close International PCC Limited and Falcon Insurance PCC Limited.
POTENTIAl USES OF A CEllIn most jurisdictions there are no restrictions regarding the type of business that can be undertaken by a cell. Below are some examples of potential uses and types of business that could be undertaken:
• Funding increased deductibles on corporate insurances – e.g. providing cover on property, public and product liability, employers liability and motor risks.
• Joint ventures and strategic alliances.• Professional indemnity retentions.• Providing access to specialist reinsurance markets.• Providing access to Terrorism pools – such as Pool Re.• Writing ‘niche’ insurance products where
conventional cover is expensive or unavailable.• Acting as a reinsurer for customer insurance
products – where participation in underwriting surpluses is enabled e.g extended warranty.
• Special Purpose Vehicles (SPVs) – for instance to facilitate the translation of capital market transactions.
MANAGEMENT AND OPErATIONManagement couldn’t be easier. Willis undertake all aspects on your behalf and deliver to you the service you require.
CASE STUDIESCASE STUDY 1Client Company: Medium sized manufacturing company with plant/factories in a number of locations.Risks: Corporate risk including PD/BI, PL and EL.Impetus for self insurance:
• Clients loss experience not recognised by market quotation.
• Clients loss experience very positive and likely to realise underwriting profit.
• Risk Management initiatives not given appropriate credit by market.
CASE STUDY 2Client Company: Medium sized, privately owned company. Installs and maintains heat-efficient boilers.Risks: Client issues customers with a guarantee to cover annual maintenance and repair. Client recoups from sales cost/warranty charge.Impetus for self insurance: Client originally purchased insurance for the guarantee/warranty, which led to:
• The build- up of a reliable set of claims performance statistics.
• A realisation that the insurers were making significant profits each year.
• A desire to participate in underwriting profits and derive greater control over ratings.
CASE STUDY 3Cells have recently been used in the structuring of credit swap transactions responding to:
• Pension deficits.• hedging of annuity payments between actual and
theoretical mortality rates and cash flows.• Preservation of capital for high Net Worth investors.
COSTSCost savings can often be achieved compared with pure captive arrangements, less executive time required, and more flexibility over the amount of capital required albeit a cell will need to be funded adequately to cover its exposures. Cell costs will range from £20,000 annually plus some initial legal expenses but may be higher for more complex programmes.
CONTACTS
Richard Paris SmithTel: +44 (0)1481 735 608Email: [email protected]
Richard FallaTel: +44 (0)1481 735 615Email: [email protected]
Neill Brookes Tel: +44 (0)1481 735 618Email: [email protected]
CORE
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B
A
E
D