A “Protected Cell Captive” company is a niche insurance company owned and controlled by the sponsoring or core capital provider, which operates insulated insurance cells. Each cell is created specifically for the benefit of a client. The performance of each cell is determined by the premium and investment income earned within it, less any reinsurance, claims, and management costs. Euroguard is governed by Gibraltar’s Protected Cell Companies Act, 2001 (as amended) and this legislation specifically provides for the legal segregation of assets and liabilities between various cells in a cell captive insurance company. The adoption of the PCC legislation provided further legislative effect to the contractual cell captive agreement that Euroguard had successfully implemented since inception.
Underwriting Profit
All underwriting profit generated by the protected cell is for the benefit of the cell owners and associated policyholders. The Protected Cell Shareholders Agreement demonstrates how this will be calculated and, in summary, is as follows for each insurance programme:
An Experience account is credited with:
- All premiums received by Euroguard;
- All over-riders, commissions and fees earned;
- All investment income earned.
The Experience account is then charged with:
- Reinsurance premiums paid or due;
- Claims paid;
- Claims admitted but not yet paid;
- Claims incurred but not yet reported;
- Expenses incurred in connection with the underwriting and investments relating to the preference shareholder;
- Underwriting fee and management fee.
Any remaining underwriting profit will be available for distribution as a dividend to the preference shareholder. This profit could also be retained within the cell to build insurance reserves, to underwrite the risks in future years.
Protected Cell Shareholders Agreement
The period required to be a shareholder in the alternative risk transfer market is 3 years. Through experience, we’ve seen that this is the minimum period required to see the true benefits from your risk financing programme. The shareholder agreement covers the following aspects:
- Calculation of the protected cell’s experience account;
- Calculation of preference shareholder fund and right to dividends;
- Investment management of protected cell’s funds;
- Maintenance of solvency margins;
- Financial reporting to the cell owner.
Termination of Arrangements
On termination of the agreement, the cell owner will become entitled to a final dividend declaration equal to the retained earnings of the protected cell, assuming the business is profitable.
When the agreement has been terminated, and provided all liabilities in the protected cell are extinguished, there will be a return to the preference shareholder of all retained earnings, including amounts previously set aside for reserves, against which claims were not made.
Upon the preference shareholder satisfying all claims against their protected cell, the amount originally invested as share capital and premium can be returned to the shareholder. This is accomplished by the redemption of the shares.
Shareholder Protection
We pride ourselves on being able to provide a level of control and protection greater than that usually offered by similar captive facilities. This is demonstrated by our extensive experience in managing cell captive operations worldwide. The contractual Protected Cell Shareholders Agreement entered into between Euroguard and the cell owner is backed by the statutory provisions of the PCC Act for legal ring-fencing between the cells. Where appropriate, each cell or structured programme will be protected by reinsurance.
Direct Writing into the United Kingdom
Gibraltar is a dependent territory of the United Kingdom and is therefore able to access clients within the UK directly without incurring fronting costs. This special link with the UK means that Gibraltar insurers can offer facilities and solutions offered by very few other countries.
Quarterly Financial Reporting
We supply all our preference shareholders with quarterly financial and underwriting information pertaining to their protected cell. This information includes a balance sheet, an income statement, and notes thereto
Classes of Business
We have clients from diverse business backgrounds because we’re a fully regulated insurance company licenced to write all short-term classes of business.