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EU Protected Cells

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Ian-Edward Stafrace

on 19 September 2016

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Transcript of EU Protected Cells

MSc (Risk Mgmt.) FIRM FCII
Chartered Insurance Risk Manager

Chief Risk Officer

Atlas Insurance PCC Ltd
ian.stafrace@atlas.com.mt
www.atlaspcc.eu
EU Protected Cells
Non-Cellular
Core
Cell 1
Cell 2
Cell 3
Cell 4
Cell 5
Cell 6
Cell 7
Travel Cancellation
Insureds:
Consumers Booking Rooms
Cell Owner
Hotel Chain
Property Damage &
Extended Warranty
Insureds:
Consumers
Renting Household Goods
Cell Owner
Retailer
Captive Motor Fleet
Insured:
Cell Owner
Cell Owner
Supermarket

Reinsurance
Cell
Cell Owner
Global Retailer
Pet Insurance
Insureds:
Pet Owners
Cell Owner
Vet Group
Property Insurance
Insureds:
Austria Households
Cell Owner
Insurance
Intermediary
Gadget Insurance
Insureds:
Netherlands, Belgium & UK Gadget Owners
Cell Owner
Aftersales
Specialist
PCC


Inactive pure hosting
Typically:
minimum capital required by regulation
minimal staff
more restrictive risk appetite on cells writing compulsory or third party risks or those not fully funded
less risk to PCC core
PCCs Non-Cellular
Cores could be
Cell
Cell Owners
Business
Non-Cellular
Core
PCC
Capital
Premiums
& Risk
Claims Payments
Commission
Cellular Dividend
Incl Underwriting & Investment Profits
Reinsurers
Ceded RI
Premium
RI Claim Recoveries
Cell Hosting, Oversight
& Risk Fees
Secondary Recourse should cell assets not suffice
to meet its liabilities
Cell Agreement
between
PCC
and
Cell Owner
on Cell establishment and respective rights and obligations
Insurance Policy

As the case may be:
Management Agreement
with
Insurance Manager
Services Agreements
(Claims, Policy Admin,...) with outsourced parties (can also be
Cell Owner
)
Reinsurance Agreement
with
Reinsurers

In all cases the Cell and Insurer would read
"XYZ PCC Ltd in respect of its ABC Cell"
Commitment to meet cell's funding requirements
PCC
BOARD
Risk & Compliance Committee
Various Governance Policies:
Underwriting, Reinsurance,
Risk Management, ORSA, Compliance,
Business Continuity, Fit & Proper,
Outsourcing, Claims Management,
Asset-Liability Management,
Credit, Investments, Liquidity, ...

Reference for detail in respect of each cell
to Operations Manuals of each cell
Audit
Committee
Protected
Cells Committee
Executive
Committee
Investments
Committee
Internal
Audit
Actuarial
Function
...
Cell 1 Committee
Cell 2 Committee
Cell 3 Committee
Cell 6 Committee
Cell 7 Committee
CELL OPERATIONS MANUAL
Within wider framework, this single document connects
PCC Level with Cell Level Policies and simplifies evidencing
of governance specific to the Cell

Licence Conditions

Cell Committee

Strategy

Risk Management
Risk Register
Risk Appetite
Authorisation Limits
Business Continuity
Members:
Cell Owner
Representatives & Advisers
PCC
Representatives
Insurance Manager
(if applicable as secretary)
Cell 5 Committee
Cell 4 Committee
Solvency II Efficiencies for Cells
Reducing capital requirements
Cost burden sharing on governance & reporting
PILLAR 1
PILLAR 2
PILLAR 3
No absolute floor Minimum Capital Requirement

Possibility to rent core surplus funds
Cell's notional Solvency Capital Requirement (nSCR) for small undertakings often less than typical minimum for standalone direct insurers of €3.7m
PCC core may, subject to its risk appetite, lend its unrestricted surplus funds to cells to meet their nSCR where in deficit
Shared Governance
Shared Reporting
Principal risk management & governance requirements already catered for by PCC lending economies of scale

Single Own Risk Solvency Assessment (ORSA) for entire PCC Shared Actuarial Function
...
Principal procedures and resources already in place to meet quarterly and annual reporting requirements
...
ORSA Process
Risk Governance
Risk Analysis
Insurance Risk
Catastrophe
Core
Cell 1
...
...
Market
Spread
Core
Cell 1
,,,
...
Counterparty Default
Diversification
Operational Risk
Cyber
....
....
Stress Scenarios
...
ORSA Report
Risk Register
Cell Examples
PCC Governance
Ian-Edward Stafrace
Agreements


Active Underwriters
Typically:
maintain material surplus over capital requirements
have more staff
less restrictive in risk appetite
increased importance of risk governance to manage cell risks to core
In all cases each cell's assets
are always protected by law
from liabilities of the core or other cells

Underwriting

Reinsurance

Claims Handling

Other Outsourcing

Complaints

Investments & Dividends

Accounting & Reporting
Full transcript