United SPC was incorporated and registered in December 1998 under the Companies Law of the Cayman Islands as a Segregated Portfolio Company. A company registered as a Segregated Portfolio Company has the ability to establish separate Segregated Portfolios within the Company whereby the assets and liabilities of one Portfolio are legally segregated from the assets and liabilities of any other Portfolio. Should a Portfolio become insolvent, the citors of that Portfolio only have access to the assets of that specific Portfolio and, if necessary, the General Assets (as defined in the Companies Law) of the Company, which do not include the assets of any other Segregated Portfolios.
United SPC holds an Unrestricted Class “B” Insurer’s License under the Insurance Law of the Cayman Islands and is authorized to write “General” and “Long Term” business as defined in that Law. United SPC is a wholly-owned subsidiary of United Insurance Company (“United”), a company formed in 1975 to provide insurance and reinsurance capacity and pooling arrangements to captive insurers under management by Aon Captive Insurance Managers, in their respective domiciles.
Opportunities and Solutions
A cell company can assist clients with unusual or one-off transactions by catering to their needs as and when they arise, often in response to unpictable or sudden market changes.
Managing General Agents
A cell company is a very attractive way for profitable MGA’s to get “some skin in the game”. In general the insurance carrier generally gets to keep all the profit.
Setting up a cell means that the MGA can reinsure part of its own risks to the “Segregated Portfolio Company” (with carrier permission), uce frictional costs and thus improve loss ratios further, and ultimately take dividends. Alternately the cell can use any surplus retained to underwrite more of its own reinsurance risk. .This approach also assist in making a given book of business transferable should the need ever arise, United can provide reinsurance to the “cell”.
Access To Specialized Reinsurance Markets
United Insurance Company';s principal business is providing reinsurance capacity to captive insurance companies, including cell companies, managed by Aon Global Insurance Managers (worldwide). Utilizing a cell will allow clients access to this and other capacity, without the need for full captive ownership.
Access To Entire Reinsurance Market
Many of today’s property and marine programs (though applicable to many classes of business) can remain incomplete or undersubscribed in the traditional insurance market past their renewal date. One way of addressing these incomplete placements is to access reinsurance markets, thereby facilitating complete placement. Such opportunities are typically seen at the last-minute, and require a prompt turn-around. The regulators in both Cayman and Vermont will generally approve a new cell within a week of receipt of the business plan, as opposed to longer review period for a “pure captive”.
Financing Higher Retentions
Many corporations are now being requi to take higher property and casualty deductibles/SIRs than they are necessarily comfortable with. A cell within has the ability to quota-share this retention with various carriers who specialize in writing exposed and/or primary layers of programs
Advantages of Segregated Portfolio Companies
To a very large extent the benefits that may arise through owning a captive insurance company may be duplicated through a Segregated Portfolio Company program. Some of these benefits can be summarized as follows:
- secure the profit on a program that would otherwise remain with the original carrier
- uce the frictional costs on a program leaving more of the original premium available for claims
- provide cover that might not otherwise be available
- provide opportunity to earn investment income on premium/reserves
- formalize deductibles and arrange “buy-back” programs
- access to the reinsurance market where terms and conditions may be more favorable.
Other benefits that may arise through using a Segregated Portfolio Company rather than owning a “stand-alone” captive could include:
- reduce time needed to be devoted to corporate matters e.g. no directors meeting, etc.
- no company establishment costs
- immediacy of the facility (do not have to wait for incorporation and licensing of an insurance company)
- may require less direct cash commitment.
- No mention has been made on the potential tax impact of such an arrangement since the circumstances will vary from one shareholder to another. It is always in the best interests of anyone considering purchasing Portfolio shares in United SPC to first seek legal advice which should include a review of the potential tax issues.
Ownership & Structure Application
Upon receipt of a written request, the Company will forward to any potential participant a copy of the Private Placement Memorandum which will include as Exhibits.
- A copy of the Company’s Memorandum and Articles of Association (its incorporation documents)
The Company has an authorized share capital of $600,000 divided into 600,000 shares (500,000 voting ordinary shares, par value $1 per share and 100,000 non-voting portfolio shares, par value $1 per share). United Insurance Company has purchased all of the voting ordinary shares: as a result it controls all voting rights and has the ability to elect all of the directors of the Company.
- A Subscription Agreement details the agreed purchase price of the portfolio shares of the specific portfolio as well as containing representations and warranties to be made by the proposed shareholder.
- A Portfolio Shareholder Participation Agreement
Each portfolio shareholder is required to enter into a Portfolio Shareholder’s Agreement. The agreement contains a number of provisions relating to the rights and obligations of each Portfolio Shareholder, including:
- Conditions under which shares can be repurchased
- The designation of Portfolio Program risks
- The determination of when dividends may be paid to the Portfolio Shareholder
- Whether and to what extent the Portfolio Shareholder will be requi to indemnify the Company for greater than expected losses.
- A requirement to submit all disputes to arbitration in the Cayman Islands
A Personal Questionnaire to be completed by the proposed shareholder and which, amongst other items, contains declarations by the proposed Shareholder as to his professional and personal standing