MAS looking to introduce protected cell company corporate structure

SINGAPORE — The Monetary Authority of Singapore has unveiled proposals for a protected cell company (PCC) framework designed to lower the cost and complexity of establishing captive insurance, insurance-linked securities and sovereign risk pool structures.

The proposals aim to support the growth of alternative risk transfer solutions and enhance Singapore's role as a risk management hub, MAS said in a press release on Tuesday (July ).

If implemented, the framework could make Singapore a more attractive domicile for Asian corporates, reinsurers, ILS sponsors and public-sector risk pools seeking flexible structures for ringfenced insurance arrangements.

A PCC operates as a single legal entity with a central core and one or more cells, within which assets and liabilities are segregated. 

The structure allows multiple insurance programs or transactions to sit in separate cells while sharing centralised governance and oversight.

MAS said companies currently need to establish individual entities, such as special purpose vehicles, to ringfence capital, assets and liabilities for each risk programme or coverage.

By removing the need to establish a separate vehicle for each programme or transaction, the framework aims to make smaller or repeat structures easier to execute.

The PCC framework is initially focused on three insurance use cases: captive insurance, ILS and sovereign risk pools.

For captives, MAS said the framework would allow firms to manage multiple self-insurance programs through separate cells within a common core, or participate in rent-a-captive solutions using a segregated cell within a shared captive facility.

For ILS, insurers and sponsors could issue securities through separate PCC cells without setting up a new special purpose vehicle for each transaction, helping reduce issuance costs and accelerate execution, MAS said.

MAS said this could make smaller transactions, including sidecars and collateralised reinsurance arrangements, more viable.

For sovereign risk pools, PCCs could support facilities that pool risks across countries or participants, including disaster risk financing initiatives, while keeping different risk exposures segregated within one structure.

Interested parties can access MAS' consultation paper on the framework and submit comments through the central bank's website. 

The consultation opened on Tuesday and closes on Aug 7.

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