More flexibility as cell captives evolve

- Herman Schoeman, MD of Guardrisk

Any suggestion that the concept of cell captive insurance has had its moment in the sun has been negated by recent developments in Jersey - one of the world's leading alternative risk transfer (ART) centres. At the end of 2005, Jersey introduced new legislation, which brings to the table a new concept, currently unique to Jersey: Incorporated Cell Companies (ICCs) - undisputable proof that the ART industry is alive and well, and has not lost its penchant for innovation.

After originating in South Africa in the early nineties, the contractual cell captive concept further developed internationally in the form of Protected Cell Companies (PCCs). And recent developments in Jersey indicate that - without taking anything away from the original "product" - there is still room for development and originality.

The advent of contractual cell captives and PCCs heralded a new era in corporate insurance, with increasing numbers of corporates opting for the customization and flexibility that exists within the ART environment - ICCs take these concepts to the next level.

The difference between contractual cell captives and PCCs, and ICCs is simple, but significant. The ICC creates incorporated cells, which are separate companies with their own legal identity. ICCs may hold assets, and sue and be sued in their own right.

This unlocks enormous potential for corporates, providing unprecedented flexibility. Cells within an ICC can even contract with one another. This means that an individual cell can effectively hedge its risks through insurance, reinsurance or participation in another cell as an alternative capacity provider. Thus wider application of the cell captive concept is now possible - opening a whole new world of risk management and financing options to cell owners.

Perhaps the time is ripe for the local ART industry and regulators to take cognisance of international developments in this arena. There is no doubt that the cell concept will continue to evolve and the time may have come for the local ART industry to consolidate, and write the next chapter in the cell captive story.

For further information please contact:
Herman Schoeman, MD of Guardrisk
Telephone: +27 11 669-1001

Issued by:
Melanie Davis, PR@Work
Telephone: +27 11 615-3309 / +27 83 225 7450