What is a protected cell captive and who uses one?
A walled compartment inside somebody else's captive
Fenhua Liu defines a protected cell as a segregated account attached to a sponsored captive, each cell owned by its own participant. The separation is the whole point: assets, liabilities, obligations and surplus do not cross between cells, so one cell's surplus is not available to pay another cell's obligations. She says companies choose cells to save cost, and describes participants renting a cell that still behaves like their own pure captive while sharing the fees, the tax filings and the sponsor's structure.
Start with the shape. A sponsored captive is the container, and cells sit inside it, each owned by a participant. Liu's phrasing is that each cell is segregated from the core of the sponsored captive and from every other cell.
The separation is legal rather than administrative, and it is what makes the structure usable. Assets, liabilities, obligations and capital do not move between cells.
Key takeaways
A protected cell is a segregated account inside a sponsored captive, owned by its participant and walled off from the core and from other cells.
One cell's assets and surplus cannot be used to meet another cell's obligations, which is what makes sharing a container with strangers workable.
Participants rent cells to share fees, taxes and the sponsor's structure instead of forming and running their own captive.
The consequence is the sentence a prospective participant needs to hear: one cell's assets and surplus are not responsible for another cell's obligations. You are not exposed to the claims of the strangers sharing the container with you.
That is the difference between a cell and a group arrangement where members share risk. It also explains why the structure appeals to participants who would never join a group captive.
From the conversation
Fenhua Liu
Assistant Deputy Commissioner and Director of Captive Insurance, Connecticut Insurance Department
“They just rent a cell. It still act like their own pure captive”
This answer begins at 16:59 of the full conversation. Watch or listen to the whole thing.
Citations
Sources
- Captive Insurance Regulation, Connecticut Insurance Departmenthttps://portal.ct.gov/cid/mission-and-divisions/captive-insurance
The views expressed are those of the featured guest, drawn from a recorded conversation, and reflect their own professional experience. Nothing on this page is insurance, tax, legal, or investment advice. Consult your own advisors about your specific situation.
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