CELL CAPTIVE MARKET
The cell captive market has developed over the past 30 years in response to the need and aspiration of both Intermediaries and UMAs to have an increased role in the underwriting activities of their clients. Risk finance companies are ideally positioned to fulfill this need by providing independently owned cells within their companies that effectively operate as small insurance companies. They are therefore able to underwrite risks, issue policies, and pay claims whilst complying with all necessary insurance laws and regulations. This provides the owners of these cells with the opportunity to build capacity, share in the benefits of the insurance activities, and service niche markets more effectively. The benefits of these structures are that they offer cell owners the ability to operate as insurers with relatively low levels of capitalization and without having to take on the regulatory compliance and risk management requirements that are demanded of insurance companies. There are a small number of cell captive or ‘risk finance’ insurance companies in South Africa but these have grown substantially in line with the growing need for their services. Cell captive companies broadly provide insurance cover for the cell owner's own risks, the risks of 3rd parties which are placed into the cell by the owner or its intermediaries.
WHAT IS A CELL
- A cell is an independently owned, fully capitalized operational unit within Yard Insurance and is capitalized through the issue of ordinary shares that are owned and paid for by the owner.
- A constitution of a cell is formalized through the creation of a shareholders’ agreement which is agreed upon between Yard Insurance and the client.
- Once this has been done, portfolios can be introduced to the cell where they are underwritten and where they can be the owners’ own insurances or those of a 3rd party.
- The owners, intermediaries, and underwriting managers are then able to proceed with introducing policies and portfolios into the cell where they are underwritten.
- Claims commissions and expenses are paid for within the cell and net residual profits are accumulated in the cell and available for distribution to the owner of the cell.
- The owner’s UMA and intermediaries provide the necessary bordereaux information to support this business but thereafter Yard Insurance takes on the responsibility for generating statutory management and underwriting information to satisfy all regulatory requirements and to assist owners in managing the cell and its relevant portfolios.
- Yard Insurance's responsibilities are ensuring that all relevant compliance governance and risk management requirements are properly dealt with within the cell.