Guernsey’s world-leading protected cell company (PCC) marks an important milestone this month.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.
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
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. In the funds industry for example, 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.
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 testament to the ingenuity of a simple idea.