1 February 2017Analysis

Guernsey’s protected cell companies reach 20-year milestone

The concept of a protected cell company (PCC), which was first introduced in Guernsey through the enactment of the Protected Cell Companies Ordinance 1997, is now 20 years old.

PCCs are now used across the financial services world as an alternative application for the structuring of many different types of product, said Guernsey Finance.

The world’s first PCC, Aon’s White Rock Insurance Company, was established in Guernsey on February 1, 1997, and was the first cell company legislation of its kind.

White Rock has now been used by more than 100 corporations as a cell captive facility and has grown to be the largest structure of its kind globally, added Guernsey Finance.

Steve Butterworth, director of insurance at Guernsey Financial Services Commission until 2003, is widely credited with developing Guernsey’s PCC concept.

Butterworth said: “For prudential reasons when the legislation was first drafted, the idea was to limit the use of PCCs to licensed insurance and investment companies, but we were very much aware of the myriad other possible uses.

“I always thought that once the concept became internationally accepted its use would become widespread across financial services and that has proven to be the case, but I am still surprised at some of the areas it is not more widely used, including by institutions for mergers, acquisitions and disposals. It is an ideal piece of legislation for a banking group, especially to ringfence assets and liabilities. As a result, there is still lots of development and diversification to come in the area of PCCs.”

Dominic Wheatley, chief executive of Guernsey Finance, added: “The fact Guernsey’s cell company concept has been copied by finance domiciles across the world, with thousands of PCCs and cells employed across the insurance, funds and private wealth sectors, is a tribute to the genius of Steve’s simple idea.

“Innovation is at the heart of Guernsey’s financial services offering and the PCC is a perfect example of how Guernsey contributes on a global scale. It was hailed as one of the most innovative insurance solutions to be introduced to the captive and alternative risk transfer markets and cemented our position as Europe’s leading captive insurance domicile, but the structure is now an accepted mainstream option across all areas of the global finance industry.”

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