A PCC consists of a Core and a number of Cells.
The Core is formed by the issue of voting ordinary shares (usually “A” shares), whose holders are the controllers of the company in terms of electing directors, corporate governance etc. Typically the Core Shareholders will deposit the relevant capital, sufficient to meet the regulatory requirements (currently minimum €3.5m) and establish and licence the company. Note that the capital actually deposited must include a margin for working capital in the initial stages.
The Cells are formed by the issue of non-voting redeemable preference shares, usually with a low nominal value. The way in which a Cell is formed depends on whether the Cell user wishes to deposit capital to fund the underwriting portfolio:
– Where the Cell user deposits capital, the Cell Share would be issued to the Cell user, and a premium paid on the share equivalent to the capital it is agreed will be deposited;
– Where the Cell user doesn’t deposit capital, the Cell Share would be issued to the Core Shareholders at its nominal value. The capital used to support the underwriting is deemed to be part of the Core Capital.
In order to set the PCC up, it is advisable to use the services of a lawyer specialising in this type of structure, and an insurance manager to assist with the licensing process. Having said that, once structure (share values, initial capital etc.) and legal documents (Memorandum and Articles of Association etc.) are agreed, the actual incorporation can be quite rapid.
To enable the PCC to write insurance business, the FSC will require a licence application in the same way as for a normal insurance company, though it will be accepted that the business plan may be somewhat more speculative. The application consists of a Form 1 questionnaire, copies of all legal documents, a financial business plan based on business projections and full information on all controllers (shareholders, managers etc.).
Once the PCC is established, business written in each individual Cell has to be subject of a short-form application to the FSC. The FSC has a fast-track system in place to process such applications.