The popularity of cell captives over the last twenty years is quickly growing. Many domiciles throughout the world choose to adopt this insurance structure because of the transfer of alternative risk. Since there are three different types of cell captives available to businesses, here are some key elements you should know before making any long-term commitments.
Protected Cell Captive
Often within a cell captive, a cell insurance company gives outside entities access to captive operations for a fee without the additional financial commitments from having to set up their own. A Protected Cell Captive or PPC is a corporate entity in which assets and liabilities are segregated using one or multiple cells in the company. Since each cell is separate from the other, assets can’t be affected by other liabilities.
Incorporated Cell Captive
Incorporated cell captives are similar to a PPC, yet each cell is incorporated and therefore designated as its own legal entity. Core companies are required to file separate tax returns and meet both the minimum and maximum tax limits determined by their domicile.
Series LLC Captive
This cell captive structure is the newest in development and includes multiple individual cells called an SBU or Special Business Unit. In this scenario, core companies must meet a minimum capital requirement before beginning operation.
Cell captives are appealing to many entities because they provide flexibility and offer shared risk. However, before you commit to using a cell captive, it’s essential to understand their intended structure.