The protected cell company turns 20

01 February 2017

Today marks the 20th anniversary of the introduction of Guernsey’s world-leading protected cell company (PCC).

The Protected Cell Companies Ordinance, 1997, came into effect on 1 February 1997 for Guernsey’s captive insurance sector and was the first cell company legislation of its kind anywhere in the world. The subsequent success of this innovation is illustrated by the fact it is now used across the financial services world as an alternative application for the structuring of many different types of products.

Aon’s White Rock Insurance Company PCC Limited, which was established in Guernsey in 1997 as the first PCC in the world, 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.

“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." Guernsey Finance Chief Executive Dominic Wheatley

Steve Butterworth, Director of Insurance at the Guernsey Financial Services Commission until 2003 and the man widely credited with developing Guernsey’s PCC concept, 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.”

Guernsey’s cell company expertise has been evidenced regularly since the PCC’s introduction. For example, in 2010 Heritage Insurance Management (now Artex Risk Solutions) achieved a worldwide first by amalgamating two PCCs – with 17 cells between them – into one. In the funds industry, Guernsey also hosted the first-ever conversion of a PCC to an incorporated cell company (ICC) during a process which created the world’s largest ICC mutual fund.

“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." Steve Butterworth, former Director of Insurance at the GFSC

Dominic Wheatley, Chief Executive of Guernsey Finance, said: “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.”