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We have compiled frequently asked questions regarding PCCs (Protected Cell Captives).
Please select the relevant question to view the answer.
Q1: What is a PCC?
A Protected Cell Captive (PCC) is a form of captive insurance company structured to segregate assets and liabilities into legally distinct cells. It typically operates as a licensed reinsurance entity, partnering with a fronting insurer to underwrite and manage general insurance risks on behalf of cell owners, while maintaining strict legal and financial separation between each cell and the core.
Q2: To what extent are PCCs used in Japan and globally?
According to Captive Review magazine, as of the end of 2024, there were 6,079 captives operating worldwide, with 3,753 active cells under Protected Cell Company (PCC) structures.
In Japan, the number of captives is estimated to be around 100, although official statistics are limited.
Q3: Does using a PCC guarantee a profit?
A PCC does not guarantee profitability. If the claims paid exceed the reinsurance premiums received, no profit will be generated. However, due to its lower cost structure, a PCC generally offers a more favorable environment for generating profits compared to a traditional captive.
Q4: What types of insurance are eligible under a PCC?
Generally, any class of general (non-life) insurance is eligible. However, lines with high claim frequency or loss ratios exceeding 50% are typically not recommended for inclusion in a PCC structure.
Q5: What local legislation governs PCCs?
PCCs are governed under the Labuan Companies Act 1990.
Q6: Which law governs the dividends on cell (preference) shares?
Dividends on cell shares are governed by the Labuan Companies Act 1990, specifically Sections 130T (3) and (4), and Section 140.
Q7: What are the relevant laws, regulations, and guidelines concerning PCC and captives in Labuan?
Labuan Companies Act 1990 – Sections 130N to 130ZC apply specifically to PCCs, though other sections may also be relevant.
Labuan Financial Services and Securities Act 2010 – Sections 101 to 128 cover insurance business, though not all are directly related to captives.
Guidelines on the Establishment of Protected Cell Companies (PCC)
Guidelines on Capital Adequacy Requirements for Labuan Captive Insurers
Guidelines on Captive Insurance Business in Labuan IBFC and its clarification note
Guidelines on General Reinsurance Arrangements
Q8: Apart from management by Green Oak PCC, is there any regulatory protection for a rented captive cell from foreign authorities?
In Labuan, regulatory oversight is provided by the Labuan Financial Services Authority (LFSA). The LFSA monitors the solvency margin ratio at the individual cell level, ensuring that each cell maintains sufficient capital to meet its obligations, and that both the core and the cells remain solvent.
From an accounting and legal perspective, Section 130S(3) of the Labuan Companies Act 1990 mandates ring-fencing of each cell’s assets and liabilities. This statutory segregation ensures that the financial position of one cell does not impact other cells or the core PCC. Even in the event of a cell’s insolvency, creditors have recourse only to the assets of that particular cell.
