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EU Onshore Insurance Protected Cells - Captives on a Budget


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The use of EU onshore Protected Cells as a capital efficient, cost-effective, flexible and secure alternative to owning a standalone insurer or captive, together with the benefits PCCs offer under Solvency II. Presentation by Ian-Edward Stafrace to the Financial Services In Malta conference in Stockholm Oct 2011 on Insurance Protected Cell Companies (PCC)

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EU Onshore Insurance Protected Cells - Captives on a Budget

  1. 1. EU Insurance Protected Cells Captives on a budget Ian-Edward Stafrace MIRM FCII PIOR Chartered Insurer Risk Analyst & International Business Development Atlas Insurance PCC Ltd Financial Services In Malta Stockholm Grand Hotel, 5 Oct 2011
  2. 2. Owning a Cell in a Protected Cell Company (PCC) Insurance PCC Purpose  Segregate cellular assets & liabilities  Allow different owners with varying interests to participate in 1 company  Cells set up with less capital as min requirements apply to PCC as a whole PCC Cell Cell Core Cell Cell
  3. 3. Why Malta Only EU State To Have PCC Legislation Approachable Regulator EU Single Passport English, Time Zone, Flight Connections EU Compliant Regulations Tax Efficient
  4. 4. Protected Cells: “Low-cost” Alternative To Owning A Stand Alone Insurance Company Or Captive No Minimum Guarantee Fund (MGF) Required • Complying with EU directives through PCC core capital • E.g. Typical minimum capital needed for general insurer with €1m annual premium: EU Standalone Insurer EU Protected Cell No Fronting Required for EU/EEA Risks Reinsurance access for smaller investors Lower Running Costs vs. Stand-Alone companies
  5. 5. Benefits of PCC under Solvency II Pillar I Quantitative Requirements • Core puts up Minimum Capital Required (MCR) • No MCR absolute floor applies to cells (unlike standalones which require min €2.3m/3.5m as per Solvency 1) • Cells only need to put up own Solvency Capital Requirement (SCR), typically lower than MCR for small undertakings • PCCs with active cores lend diversification benefits to cells where secondary recourse is allowed, further lowering SCR Pillar II Pillar III Governance, Risks Management & Internal Control Requirements Disclosure Requirements All already catered for by PCC under its regulated license All procedural structures & resources in place to report & publish results as one single legal entity  Maltese PCC = Cost sharing of SII requirements &  Capital for cells Cell Cell Core Cell Cell
  6. 6. Atlas Insurance PCC Ltd History Benefits Under Solvency II Independent PCC • Leading Maltese Insurer since 1920s • First EU PCC after converting in 2006 • Active non-cellular core in which local business is written • Less capital required whilst protecting the policy holder as Atlas can allow cells to have secondary recourse to its active core • Less costs thanks to shared governance, risk management & reporting • Enable subcontracting of cell management to authorised insurance managers Strong Core Solvency Position At End 2010 (Solvency I) At End 2009 (Solvency I) At End 2009 (QISV Solvency II) Regulatory Solvency Required (SCR) €3.5m €3.2m €7.1m Actual Position Solvency Ratio €14.5m €13.6m €16.9m 414% 425% 237%