Medium-sized enterprises can find themselves in a difficult position when it comes to risk management and insurance programs. You may not have the same financial and people resources as large corporations, but nevertheless face similar complexities around managing the risk you retain versus transfer to insurance markets in the most effective and efficient ways.
When traditional insurance solutions aren’t always well-aligned to your specific needs or financial capabilities, cell captives offer a forward-looking and cost-effective alternative, with captive feasibility projects allowing you to clarify how much risk to retain, pricing and other choices.
Below, we take a closer look at cell captives, explaining what they are, their potential advantages for medium-sized enterprises and what you’ll need to consider carefully when evaluating if a cell captive is right for you.
Protected cell companies (PCC) solutions are offered by a number of jurisdictions – including Malta, Guernsey, Isle of Man, Gibraltar, Bermuda, Cayman and Vermont, to name a few – as part of their legal and regulatory framework. While single parent captives are, as the name suggests, an insurance company owned and operated by one entity, PCC facilities via a cell captive give multiple entities access to the core benefits of captives.
Cell facilities are typically structured to create, under local statutory law, separation of assets and liabilities between the individual cells. Those companies participating in cell captive facilities are insulated from the loss experience, liabilities and credit risks of the other participants. Each cell operates independently, allowing companies to retain control over their insurance program while benefiting from the shared administrative and regulatory services provided by the PCC facility provider, or ‘host.’
There are a range of advantages your mid-size company could gain from using cell captives:
While cell captives offer compelling benefits, they are not without challenges you’ll need to consider:
As mid-size companies face an increasingly complex risk landscape, we expect cell captives to become more popular. Leveraging the advantages of captive insurance could help enhance your risk management capabilities, achieve greater financial stability and unlock new opportunities for growth and innovation.
However, the decision to pursue a cell captive requires careful consideration and strategic planning. You’ll need to assess your risk tolerance, evaluate the feasibility and cost-effectiveness and develop a comprehensive risk management strategy tailored to your specific needs and objectives. Captive feasibility studies can guide your decisions about which risk financing option best suits your needs, both in the short and long term.
Bear in mind, implementing and managing a cell captive, while less onerous than opting for a single parent structure, still requires professional planning, forecasting and continuous guidance to realize its full potential and elevate your current risk and insurance approach.
To discover a smarter way to address your risk and insurance needs using a cell captive, get in touch.
Willis Towers Watson hopes you found the general information provided in this publication informative and helpful. The information contained herein is not intended to constitute legal or other professional advice and should not be relied upon in lieu of consultation with your own legal advisors. In the event you would like more information regarding your insurance coverage, please do not hesitate to reach out to us. In North America, Willis Towers Watson offers insurance products through licensed entities, including Willis Towers Watson Northeast, Inc. (in the United States) and Willis Canada Inc. (in Canada).
