JLT Towner Insurance Management
JLT Insurance Management has expanded its Isosceles facility in the US. Thomas Stokes explains the benefits of the sponsored cell structure
JLT Towner recently set up Isosceles Insurance Company in the US. What is Isosceles and how does it work?
Isosceles is a Connecticut-domiciled sponsored cell facility available to clients and prospects seeking to set up single-parent or producer-owned cells, or to join industry-specific and non-specific group cells.
JLT has separately established Isosceles entities in other captive insurance domiciles, including Bermuda, Barbados and Guernsey. I’m the CEO of Isosceles in the US.
What is JLT Towner’s role as the sponsor?
JLT Towner has posted the necessary minimum capital required by domicile statute in order to allow participants to conduct
captive operations in individual cells, without having to post the capital themselves.
What are the advantages of insuring through a cell captive?
Cell captives generally have a lower start-up and administrative costs than other captive structures, making them an efficient alternative for the middle-market and smaller companies, or those that require minimal transactions.
Licensing is also typically faster and easier than for other types of captives, and premiums may also be tax-deductible.
Underwriting profits and losses belong to the individual cell owner, where as normally they would belong to a traditional insurance company.
Another advantage is that the cell owner gets to reinvest in the underwriting and investment income. Finally, cells are ideal for single-purpose reinsurance transactions of any size.
Are there any disadvantages?
There are disadvantages, however, whereby each cell owner must contribute adequate surplus to cover liabilities. In addition, the core company typically requires full collateralisation of liabilities, including those that may be established to pay claims over a long period of time.
What happens when a cell faces financial difficulties? Are the other cells affected?
Ultimately, the goal is to provide complete segregation of liabilities among individual cells, and domiciles have structured their enabling statutes to provide that protection. With proper maintenance and oversight, hopefully these structures will never have to be tested in the courts.
What are the capital requirements of Isosceles in Connecticut?
The core of Isosceles is capitalised with $500,000 as required by the State of Connecticut. JLT has contributed this capital. Having the core capital available relieves each cell participant from having to post individual minimum capital amounts.
This is one of the main positive attributes to participation in cell structures.
It should be noted that, depending upon the individual insurance programme of each cell participant, domicile regulators may require an amount of surplus, above calculated premium, to be contributed to a particular cell to ensure a balanced programme.
What are some of the typical organisations that are attracted to cell captives? What risks do they tend to write using a cell?
Cells are attractive in many situations. Companies that wish to directly access reinsurance markets can do so through cell participation.
Also, as noted above, companies that place a premium on capital allocation may choose cells as a way to maximise their overall capital position.
Over the past decade, captives have, more and more, become an instrument of risk managers in the middle market. At the lower end of that market, the go-no-go decision to enter into the field of captive insurance is facilitated by the ease of entry into a cell structure.
What nuances does Connecticut offer as a cell domicile?
Connecticut has made the commitment to compete with other captive domiciles and so has engaged a dedicated and experienced team of insurance professionals devoted exclusively to all captives, including sponsored cell entities.
Do you think the number of licensed cell captives will increase during 2016?
Yes. As companies become acquainted and familiarised with the concept of managing risk through a cell, the momentum will continue to build.
