Oliver Schofield, RISCS
18 February 2021Actuarial & underwriting

RISCS executes first ever simultaneous cell-to-full captive conversion and relocation

Risk and Insurance Strategy Consultants (RISCS) has completed what it believes is the first ever relocation of a cell captive that simultaneously converted the structure into a full, single parent captive.

RISCS was acting on behalf of an unnamed European client that had owned a cell captive in Europe for around five years. The cell had been very profitable, according to Oliver Scholfield, managing partner at RISCS, but the situation of the parent changed in 2019, forcing the board to reconsider whether its existing domicile was the right choice.

“The company was doing a lot more business in the US and wanted to convert its cell in Europe into a full, single parent captive in the US,” explained Schofield. “The challenge was to ensure that the cell in Europe surrendered its license at exactly the same time that the US regulator granted a license, to ensure a seamless transition of the book of business from one structure into the other.”

Schofield said: “We believe that this is the first time that a cell captive has been relocated and converted to a full captive in the same transaction. It is actually quite unusual for a captive to be moved in this way, usually it is easier to close an old captive and create a new one in a different place.”

Such a solution is harder - though not at all impossible - for long tail business, said Schofield. “There have to be significant economic reasons to move a captive to a new domicile,” he said. “It isn’t like a legacy transaction because you are moving something while it is still underwriting new business.”