PCCs and ICCs A Guernsey Innovation - Health | Aon

1 PCCs and ICCs A Guernsey Innovation An Introduction to Protected and Incorporated Cell Companies July 2012. port Document Title Aon Insurance Managers ( Guernsey ) Limited Sub-Title of Report Document 2012 Aon Corporation DateDescription: This document has been prepared for anyone seeking an Brief introduction, or who is looking to utilise Protected or Incorporated Cell Companies within Guernsey . It is not exhaustive but provides general information on the subject area. For further information please contact either of the authors. Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 1. Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs). A brief history The Protected Cell Company (PCC) legislation was first introduced in Guernsey in 1997 through the Protected Cell Companies Ordinance 1997. Since then there have been 68 insurance licensed PCCs and 395 cells formed on the Island.

2 The concept of the Incorporated Cell Company (ICC) was introduced in Guernsey through the Incorporated Cell Companies Ordinance in 2006. Both of those ordinances have since been consolidated into the Companies ( Guernsey ) Law, 2008 (the Companies Law). A PCC differs from an ICC in a similar way to the United States of America (USA) being different to the European Union (EU). The USA is one country with many States; similarly a PCC has one core with many cells. An ICC in contrast has many cells which are all separate legal entities linked together, this could be compared to the EU with its many countries linked together by a formal agreement (the Treaty of Rome). Since its inception the PCC structure has achieved global recognition. It is used widely within the Channel Islands, Bermuda, Malta, Gibraltar, Cayman Islands and the USA, often under different alias's such as a Segregated Accounts Company (Bermuda) and Sponsored Captives (USA). What is a PCC? The key feature of a PCC which differentiates it from a traditional (non-cellular) company is the segregation of its assets.

3 It essentially consists of a core and any number of separate cells. Both the assets and liabilities of one cell are segregated and protected from those of the other cells. Likewise, 1. the assets and liabilities of the core are segregated and protected from those of the cells . This prevents the exposure of the entire assets of the PCC, instead limiting its liability in respect of a particular contract to a specified pool of assets. The PCC must inform any person with whom it transacts that it is a PCC and must be sure to identify or specify the cell in respect of which such person is transacting. By doing so, creditors are notified of the limited recourse they have to the assets of the PCC. A PCC is a single legal entity; it is one company with a board of directors, one minimum capital requirement and one memorandum and articles of incorporation. Accordingly each individual cell is not a legal entity. The cells of a PCC cannot contract with each other and a cell cannot contract with the core of the same PCC.

4 These are issues which could be resolved by introducing a company (for example, a subsidiary of the relevant PCC) which is able to contract with both cells, and/or the core. This would achieve the same economic outcome as would have been the case were those cells able to contract with each other, or were the cell able to contract with the core. Two different PCCs can of course contract with each other. The PCC set up is particularly attractive to insurance companies and investment funds, perhaps due to PCCs originally only being available to licensed insurance companies and collective investment schemes. 1.. It is worth noting the 1997 Ordinance provided automatic recourse from a cell to the core unless contractually restricted. Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 2. Insurance managers such as Aon Insurance Managers ( Guernsey ) Limited (AIMG) have found the PCC structure appealing for use as cell captives, a development of the rent a captive concept.

5 The PCC facility allows the user to enter a captive both as owner and insured with similar benefits as a wholly owned captive. Insurance companies also use the PCC structure for transformers, fronters, special purpose vehicles (SPVs) and other alternative risk transfer (ART) solutions. Investment funds find the attraction of a PCC to be the avoidance of any cross-contagion between the cells, for example if a portfolio of cells within an umbrella fund becomes insolvent and the creditors attempt to enforce judgments against assets within other cells, the PCC structure prevents them from doing so. According to the Guernsey Financial Services Commission (GFSC) the following may be or become a PCC (provided the relevant consent of the GFSC has been obtained): An authorized collective investment scheme under The Protection of Investors Law, 1987, as amended (the POI Law). A closed-ended investment company A corporate licensee within the meaning of The Insurance Business (Bailiwick of Guernsey ) Law, 2002 (the Insurance Law).

6 A company administered by a person with a license under the POI Law, the Insurance Law, The Banking Supervision (Bailiwick of Guernsey ) Law, 1994 (as amended), The Regulation of Fiduciaries, Administration Business and Company Directors etc (Bailiwick of Guernsey ) Law, 2000 (as amended) or The Insurance Managers and Insurance Intermediaries Bailiwick of Guernsey ) Law, 2002 (as amended). The following cannot be or become PCCs. Licensed Guernsey banks Insurance managers or intermediaries Licensed fiduciary companies Companies licensed to carry on controlled investment business What is an ICC? An ICC has similar principles to that of a PCC. It is a company which has the power to establish incorporated cells as part of its corporate structure and, like a PCC, it may comprise of any number of cells. Unlike cells within a PCC, each cell of an ICC is a separately incorporated legal entity, as is the ICC itself. Each cell has its own board of directors, (although according to the Companies Law the board of directors of each cell must match the board of directors of the ICC), its own share capital, its own memorandum and articles of incorporation and its own audited accounts.

7 This means that each ICC cell must be registered at the Guernsey Registry and can sue and be sued in its own name. The ICC was created to provide increased protection to creditors. As each cell is a separately registered legal entity, the segregation between the assets within the ICC is strengthened. It also allows the cells to transact with one another; this is a notable contrast to the cells of a PCC. Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 3. Another advantage to an ICC is that they enable a corporate group structure to be created involving lower administration costs than a traditional group of stand-alone non-cellular companies. According to the GFSC, the following types of company can be converted or formed into an ICC (provided written consent of the GFSC has been obtained): Any fund authorized or registered under the Protection of Investors Law, 1987, as amended (the POI Law).

8 Any insurer licensed under the Insurance Business (Bailiwick of Guernsey ) Law, 2002 (the Insurance Law);. Any other type of company administered by a person licensed under the POI Law, the Insurance Law, The Banking Supervision (Bailiwick of Guernsey ) Law, 1994 (as amended), The Regulation of Fiduciaries, Administration Business and Company Directors etc (Bailiwick of Guernsey ) Law, 2002 (as amended). The following cannot be formed or converted into ICCS;. Banks Insurance managers Insurance Intermediaries Licensed fiduciaries Companies licensed to carry on controlled investment business Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 4. Contact Information John Rowson Executive Director Aon Risk Solutions Global Risk Consulting +44 (0)1481 707954. Vicky Tailby Marketing and Business Development Assistant Aon Risk Solutions Global Risk Consulting +44 (0)1481 707919.

9 Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 5. About Aon Aon plc (NYSE: AON) is the leading global provider of risk management, insurance and reinsurance brokerage, and human resources solutions and outsourcing services. Through its more than 61,000. colleagues worldwide, Aon unites to empower results for clients in over 120 countries via innovative and effective risk and people solutions and through industry-leading global resources and technical expertise. Aon has been named repeatedly as the world's best broker, best insurance intermediary, reinsurance intermediary, captives manager and best employee benefits consulting firm by multiple industry sources. Visit for more information on Aon and to learn about Aon's global partnership and shirt sponsorship with Manchester United. Copyright 2012 Aon Corporation Aon Risk Solutions | Global Risk Consulting | Captive & Insurance Management Aon Insurance Managers ( Guernsey ) Limited is licensed and regulated by the Guernsey Financial Services Commission 6.