Protected Cell Companies (PCC)
A PCC only applies to the “business of insurance” which includes the business of insurance companies, the business of reinsurance and affiliated insurance companies (also known as captives), the business of an insurance manager and the business of insurance broking. A company can only be formed or converted to a PCC with the written approval of the Malta Financial Services Authority.
A PCC has separate and distinct cells, with the assets and liabilities of a particular cell being segregated from those of other cells and from other assets and liabilities of the company. To this end, the creditors of a particular cell have no recourse against the assets of other cells within the PCC. Notwithstanding this, a PCC is a single legal person and the creation by a PCC of a cell does not create, in respect of that cell, a legal person separate from the company.
The minimum capital requirements applicable to a company (not being a PCC) operating in the insurance business sector apply to the PCC as a whole and not individually to each cell.
The required margin of solvency of the PCC shall be calculated on a cellular basis and any deficit in the cells shall be funded through non-cellular assets. The Minimum Guarantee Fund applies to the PCC as a whole.
A PCC must inform persons with whom it transacts that it is a PCC and for a particular transaction, identify or specify the cell involved in the particular transaction (unless the transaction is not a transaction in respect of a particular cell).
Where any liability arises which is attributable to a particular cell of a PCC:
- the cellular assets attributable to the relevant cell shall be primarily used to satisfy the liability;
- the company’s non-cellular assets shall be secondarily used to satisfy the liability, provided that the cellular assets attributable to the relevant cell have been exhausted;
- any cellular assets not attributable to the relevant cell shall not be used to satisfy the liability.
Any liability not attributable to a particular cell of a PCC shall be solely the liability of the PCC’s non-cellular assets.
Incorporated Cell Companies
In view of international developments in the area of cell legislation, a new draft set of regulations, namely the “Companies Act (Incorporated Cell Companies Carrying on Business of Insurance) Regulations, 2010”, were proposed in April 2010 with the aim of creating a new type of vehicle in Malta, namely Incorporated Cell Companies (“ICCs”). The said regulations are currently subject to consultation and may undergo changes before they will be officially adopted.
An ICC is very similar to a PCC except that a PCC and its protected cells form one single legal entity, and therefore a protected cell has no separate legal identity, while each ICC cell is individually incorporated, has a separate legal personality and is therefore treated as a separate company. For this reason, ICCs may provide added security over the true segregation of their assets, when compared to PCCs.
The new vehicle will be limited to the business of insurance as defined under the Insurance Business Act (Chapter 403 of the Laws of Malta) or affiliated insurance in terms of the Insurance Business (Companies Carrying on Business of Affiliated Insurance) Regulations, 2003 (Legal Notice 334 of 2003). ICCs will be required to be authorized in terms of the Insurance Business Act.
ICCs will be a novel way to assist organisations in financing risk. They will also be versatile enough to offer an extensive variety of possible products and solutions. Therefore, it is expected that the introduction of ICCs will further enhance Malta’s appeal as a domicile for insurance business.
The firm is actively involved in the provision of advice and assistance to companies authorised to carry on insurance business in or from Malta and to persons intending to commence insurance operations in or from Malta, including assistance in obtaining the relevant licences, authorisations or enrolments; regulatory compliance and ongoing assistance in the provision of legal advice related to insurance issues.