A framework for incorporated cell companies in the insurance sector was created in the Cayman Islands on 25 March, when the Legislative Assembly passed an amendment to allow the registration of portfolio insurance companies (PICs) within segregated portfolio company insurers (SPCs).
PICs offer four main advantages over existing SPCs, which also are offered in the Cayman Islands, says the Minister for Financial Services, the Honourable Rolston Anglin (pictured), who presented the Insurance (Amendment) Bill 2013 to the Legislative Assembly.
1. A PIC is a separate legal entity, whereas a segregated portfolio of an SPC is not. This means the PIC may have greater ease in dealing with counterparties than a segregated portfolio of an SPC.
2. Unlike a segregated portfolio of an SPC, a PIC can contract with another cell of its controlling SPC, or with the SPC itself.
3. Because each PIC is a separate legal entity, there should be less risk of inadvertent comingling of assets.
4. A single PIC can be wound up without affecting its controlling SPC or other PICs; this is not possible within an SPC structure.
Anglin says that PICs compete with incorporated cell companies (ICCs) that are offered in other captive domiciles, and with structures such as the Delaware Series LLC. The PIC model is also more efficient and cost-effective than introducing standalone ICC legislation.
And since PICs were created through an amendment to the Insurance Law, 2010, Cayman has positioned this vehicle to operate within fundamental and well-understood principles of corporate law, and to meet international standards.
“PICs do not involve the highly creative and untested jurisprudence involved in an ICC,” says Anglin. “Furthermore, because they will take on the form of an exempted company they will be subject to the same legal requirements as any exempted company.”
The Bill also creates new class of insurer known as Class B(iv).