PIC’s main topic at CCF

From Captive Review

One of the main topics of conversation on the first day of the Cayman Captive Forum yesterday, was the imminent arrival of portfolio insurance companies (PICs).

The Insurance (Amendment) Law allowing protected cell companies (PCCs) – known as segregated cell portfolio (SCPs) companies in the Caribbean – to register as portfolio insurance companies (PICs), was passed on March 25 2013.

The Amendment, while enacted, has not yet come into force. It is scheduled to come into effect in late December, pending some final regulatory amendments regards solvency requirements and capitalisation of a PIC.

Unlike the traditional incorporated cell, a PIC will be a separate legal entity i.e., an exempted company limited by shares. PIC’s will be regulated by the Cayman Islands Monetary Authority (CIMA), but will not need to be separately licensed as an insurance company as it will operate under the licence held by the PCC. 

Paul Scrivener, a partner at law firm Solomon Harris, says PICs are the “next logical step for SCPs”.

According to Scrivener the primary advantage of a PIC is the fact that it can contract with any person including its own SCP and other cells or PICs within the same SCP which is helpful in terms of reinsurance and quota sharing.

“The fact that a PIC has a separate board of directors from that of the SCP also provides flexibility in terms of corporate governance” says Scrivener.

“Additionally, a single PIC can be wound up without affecting its controlling SCP or other PICs which is not possible within a SCP structure. Finally a PIC can easily be converted into a standalone captive”, he says.

The implementation of the The Patient Protection and Affordable Care Act (PPACA) in the US is also likely to provide a fillip to the PIC concept, says Scrivener as single parent healthcare captives look to add physicians groups into their insurance programmes.

“Some are considering changing from a single parent captive format to a cell structure in order to isolate liabilities brought into their insurance programmes as a result of consolidation or restructuring.”

Cayman enacted cell captive legislation in 1998, and according to the Cayman Islands Monetary Authority (CIMA), nine of the 24 captives formed in 2013 were cell companies.

Of the 750 captives domiciled Cayman to mid-2013, 134 were PCCs, within which there were 657 individual cells.

The Cayman Captive Forum is being held at the Ritz Carlton in Grand Cayman from the 2-5 December.