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The Maltese PCC provides benefits on all Solvency II pillars for cells

Pillar 1

Reducing capital requirements

No absolute floor Minimum Capital Requirement

Only need to inject capital equivalent to its own notional Solvency Capital Requirement (nSCR), which with small undertakings often falls far below the typical minimum for standalone insurers of €3,700,000

Possibility to rent core surplus funds
PCC core may, subject to its risk appetite, also lend its unrestricted surplus funds to cells to meet their nSCR where in deficit

Pillar 2 & 3

Cost burden sharing on governance & reporting

Governance
Risk management and governance requirements already catered for by PCC with cost sharing significantly benefiting cells while at all times retaining full protection of their assets. E.g. Single Own Risk Solvency Assessment (ORSA) for the entire PCC.

Reporting
Same applies to Pillar III’s Reporting and Disclosure requirements, where all procedures and resources are in place to meet the quarterly and annual reporting requirements

As an EU member state and EIOPA member, Malta is continuously contributing to the development of Solvency II. EIOPA, in its Solvency II technical specifications, prescribes that cells in PCCs should be considered and treated as ring-fenced funds.

Atlas was the first EU insurer to convert to a PCC back in 2006. As one of the leading insurers in the Maltese local market, it is not averse to taking insurance risks on its core.It maintains substantial surplus funds over regulatory requirements. Subject to its own risk appetite, the core therefore has the capacity to use its surplus funds to host and support cells that do not fully meet Solvency II requirements from their own capital while, per legislation, the cells retain full protection of their assets from liabilities of the core or other cells.

Protected cells are therefore a cost-effective, flexible and secure alternative to owning a standalone insurer, reinsurer or captive. Such structures can result in significant cost and capital savings for cell owners, even more so in the EU once Solvency II is implemented.

Small mono line insurers and captives struggling with Solvency II requirements could very well consider converting to cells as an alternative to consolidation or closure.