Tuesday, May 21, 2024

Membership options

Cells still not wholly embraced by Europe, US domiciles increasingly attractive – Jelto Borgmann

Companies in certain European countries are less likely to utilise cells than others, according to Jelto Borgmann, captive portfolio manager at HDI Global.

The use of cells in Europe has become more popular, but there is a lack of choice when it comes to domiciles within the European Union, as Malta is the only EU captive domicile that has PCC legislation in place.

More broadly in Europe, Guernsey, Gibraltar and the Isle of Man all facilitate cell business, with Guernsey a particularly popular option.

“I have a feeling that some countries are more reluctant to go in the cell direction than others,” Borgmann told Captive Intelligence.

“With UK companies, they are very open to cells, but a lot of German companies still have the issue.

“There are some that went in this direction, but it is still something that is not so familiar to everybody and needs a little bit of explanation.”

Borgmann said that from his perspective there is some legal uncertainty when it comes to cells writing direct insurance within the EU.

“In Malta they can directly write business in Europe, so they could also issue policies for compulsory insurance,” he said.

“My question would be if there would be a case, for example, when the captive defaults and there is not enough money in the cell and core to pay a claim for compulsory coverage it issued, I’m still not 100% sure that the ring fencing would be accepted by the German legal system, which is not familiar with any kind of ring fencing from my knowledge.”

Borgmann said he is seeing an increasing number of companies exploring the option of domiciling their captive in the United States.

“More and more European companies are looking into US domiciled captives, and that is something we have already seen,” he said.

Several States within the US have active cell legislation as they continue to rise in popularity.

Borgmann noted that EU companies are attracted to by the enhanced processes and accessibility of the regulators in the US compared to certain European jurisdictions.

“To take one example, four or five years ago, we had a German client who had questions regarding Vermont, and they messaged the regulator on LinkedIn and a day later they had a response, and that is something you don’t get in Germany.”