The captive insurance and insurance-linked securities (ILS) sectors in Singapore are forecast to see clear growth soon after the Protected Cell Company (PCC) framework is launched by the Monetary Authority of Singapore (MAS), according to Mr Simon Goh, Partner and Head of Insurance & Reinsurance Practice at the law firm Rajah and Tann Singapore.
MAS plans to start the structure with three insurance use cases — captive insurance, ILS and sovereign risk pools.
Mr Goh told Asia Insurance Review, “For the captive and ILS sectors, I am confident that there should be very clear growth soon after the PCC regime is implemented, given we see demand from corporates, sponsors and investors for a structure beyond what a traditional company in Singapore can offer."
He added, “More companies (which wouldn’t want or couldn’t establish their own wholly owned captive insurance company), can now consider renting a cell in a PCC captive insurer set up by a captive manager, thereby saving costs, resources and time and for ILS sponsors with smaller insurance portfolios for securitisation, which would not justify the time, resources and costs of setting up a Special Purpose Reinsurance Vehicle in Singapore, can utilise a cell in a PCC for their ILS issuances."
As for the sovereign risk pool space, he said, “I do not expect there to be any immediate growth as beyond a structuring issue, getting countries to come together in a risk pool can be challenging.”
Consultations
Asked how the proposed Singapore PCC structure would compare to those in other jurisdictions such as Labuan or London, Mr Goh said, “At present, it is unclear what the Singapore PCC structure is as the consultation for this has been deferred to a second consultation paper which will only be issued after feedback from the first consultation paper is received and considered by the MAS. Hence, it is not possible to make a comparison yet.”
Last week, the MAS issued its first consultation paper proposing a framework for a new PCC corporate structure.
MAS proposes introducing the framework through a new PCC Act. There will be similarities between the features of PCCs and those of existing corporate structures, such as companies and umbrella variable capital companies. PCCs will also have certain features which are unique and set out in the new PCC Act.
The central bank has yet to say how the PCC regime should be legislated – that is, whether it is to be a standalone statute, or drafted as being supplemental to existing companies legislation. “For this first consultation paper, the key areas and proposals have been canvassed for feedback,” said Mr Goh.
MAS is adopting a phased consultation approach. The first consultation paper focuses on the policy proposals to be included in the new PCC Act, while the proposed draft Act and the policy proposals to be included in the subsidiary legislation under the new PCC Act or Insurance Act will be consulted at a later stage.
The new PCC framework is expected to be implemented in 2028.