How does it work?
Feasibility Study
Before a decision is made to form a cell it is vital that a feasibility study is
undertaken. The feasibility study will provide management of the parent organisation
with a summary of the reasons why a protected cell is feasible and recommended and
will include:
- A demonstration of the viability of a protected cell programme and the form that
it should take.
- Outline budgets and projections for the anticipated performance of the cell.
- A sound basis for the business plan, which must be submitted to the Malta Financial
Services Authority.
The feasibility study may recommend that a stand-alone captive would be more beneficial
than a cell. In this case, Atlas through its sister company Ark Insurance Management
(Malta) Ltd. would be able to assist in setting up the
captive insurance company. Alternatively the recommendation may be that the situation is
not suitable for either a cell in Atlas or a separate captive and other alternatives
may be proposed.
Application Process
Before creation, each cell goes through the Malta Financial Services Authority
application process, including the submission of a three- year business plan. Once granted a license,
the cell will be subject to individual regulation and supervision and must maintain
a solvency margin just like a separate insurance company. It is not however
required to maintain
the minimum guarantee fund.
Solvency and Technical Provisions
Adequate technical provisions have to be maintained and the required solvency margin,
in most cases, would be the greater of 18% of gross premiums or 26% of claims incurred.
In each case up to 50% allowance is made for reinsurance outwards. For premiums
above € 50 million the above percentages go down to 16% and 23% respectively for
premiums and claims. Directors of the PCC must keep both types of assets
identifiable and keep separate
records and accounts for the core and for each cell. Assets covering Solvency Margin
and Technical Provisions need not be maintained in Malta. 80% of the assets covering
Technical Provisions must be maintained in the same currency of the liability.
Fee Structure
Fees typically consist of a minimum fee for providing the PCC facility, a fee covering
the work involved in the administration of the cell and a risk premium based on
the type of business and relevant risk exposure, if any.
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