May 23, 2024


Marsh Gas

Cell Captive Insurance 

The potential of the cell captive structure for sub-Saharan Africa | FSD  Africa

Insurance comes in many forms. Life insurance, accident insurance, car insurance and many more. Insurances are acquired for mainly the purpose of protection and security. But have you heard of Cell Captive Insurance ?

What is Cell Captive Insurance?

Cell captive insurance is one of the categories of captive insurance. Captive insurance is also known as self-insurance. This insurance is built to protect and secure the interest of the company. In captive cell insurance, each insured has his own cell. This means its assets and liabilities are enclosed in his policy. In this kind of insurance the insured has control over his shares. Under this category there are types of cell captive insurance.

Rent-a Cell

Since cell captive insurance is handled by the insured, they have the power to have it rented by an outside company that is not within the cell captive insurance. They are called third parties. The third parties should follow the restrictions set by the cell where they have rented the insurance.  This kind of setting was made to give opportunities to companies who want to try if this kind of insurance works for them or not.

Furthermore, this is the most commonly acquired cell captive insurance and here are the reasons why.

  • Those who would want to try an alternative way of risk management solution can try renting such insurance to test if it’s suitable for them, especially those who have loss history.
  • This is ideal for small and medium group employers.
  • You can share your risk from your cells to another insurance company. This is called reinsurance.
  • For your interest, it will be managed separately. You can decide whether to enter your share in a certain profit sharing. This strategy can protect your profit .
  • Managing your cell is flexible including claims, risk benefits and premium. Since you have control over your insurance, it will facilitate your profit or assets to get higher profit.

Protected Cell Company

This is a type of cell captive insurance  by corporate and unincorporated entities. Rules or domicile are also controlled by them. Assets and liabilities are segregated in a cell. Each cell can run just like separate companies and they can make their restrictions as they wish. In this setting transactions are separated in each cell.

Incorporated Cell company 

This type of insurance has the power to establish an incorporated cell. Just like an incorporation, it has its own board of directors , memorandum and articles of incorporation. Unlike protected cell companies, transactions can be done from one cell to another and each has its legal entity. The advantage of this type of insurance are :

  • Lower administrative cost
  • More segregation of assets and liabilities
  • More formal process

How Cell Captive Insurance Works

Capital and start up cost are minimal.

Capital doesn’t need to be big unlike other insurances that need a certain amount to be able to start it. For this kind of insurance even small group companies can build it. Having minimal capital can make you start up quick.

Participation on agreements where each cell’s responsibilities and rights are stated.

Just like any other agreements before cell captive insurance are rented, probations are already patterned out for the third party. They can have a choice if they want to take it or not.

Assets and liabilities are segregated from each cell legally.

By having this feature, an insured can secure its assets and not worry that it can be affected If other cell assets are experiencing losses.

There is less annual operating expense for cell captive compared with standalone captive.

It has a less operating expense since staff are fewer, therefore they pay less to be able to operate the insurance company.

Reports on income statements, losses and expenses are separated too.

Having separate reports can be beneficial to the insured, since he can see the detailed income statement of this investment on the insurance he is paying for.

Having an insurance that you can easily mandate can be beneficial to the insured. This type of insurance can secure the assets from losing profit although overall insurance might be crushing. Having cell captive insurance can help you have control on your assets and profits since you can make the restrictions and stay inside the insurance. Unlike other insurances, where the company decides where to put your money or if ever you have choices, it is just limited.