Companies are increasingly converting protected cell companies (PCCs) to single-parent captive insurance companies, according to a panel at the World Captive Forum (WCF) in Orlando.
This was observed by Dan Petterson, director of financial examinations for captive insurance in Vermont. He also highlighted that he has seen the opposite occur. “In some cases, we’ve seen companies convert from a single-parent captive to a cell,” Petterson said.
The reasons for the changing of structure are dependent on the company's risk management needs, the panel explained. For example, if a company’s risk management needs increase, they might be more suited to a single-parent company.
Petterson noted that Vermont is working on passing legislation that aims to make this process easier for companies. The bill in question is the 2024 H.659 bill, which seeks to make various amendments to Vermont law relating to captive insurance.
The bill proposes changes including enabling a captive insurance company to be converted into an unincorporated cell, with all of its assets, rights, benefits, obligations and liabilities remaining unaffected by the process.
Michael Domanski, partner at law firm Honigman, explained the benefits of “trying out a captive” by renting a cell first, before establishing a single-parent captive. He listed getting comfortable with putting risk into a captive as key.
He went on to discuss the concept of PCCs further, giving the analogy that renting a cell captive is akin to renting a room from a landlord. He compared it to companies having to comply with certain terms and conditions that the cell owner dictates, such as when the tenant has to observe their landlord’s requirements.
