Malta has emerged as a prominent hub for Protected Cell Companies (PCCs) and Incorporated Cell Companies (ICCs), offering businesses unique opportunities in sectors like insurance and investment. Both structures provide flexible, cost-effective solutions for segregating assets and liabilities under a single company framework.
Malta stands out within the European Union as the only member state with legislation for both PCCs and ICCs. PCC regulations were first introduced in 2004 and refined in 2010, while ICC regulations were enacted in 2011. These regulatory frameworks, overseen by the Malta Financial Services Authority (MFSA), provide companies with a flexible environment for business needs, ensuring compliance with both national and EU-wide standards across multiple sectors.
What is a PCC Company?
A protected cell company is a type of legal entity that is structured to create and manage several ‘cells’, each of which is isolated from the others in terms of liabilities and assets. It allows for the separation of financial risks and assets into distinct cells under one umbrella company. This structure is often used in insurance and investment industries, in captive insurance, the different cells can represent different policies or insured parties, minimising the risk of cross-contamination.
Protected Cell Company Use Extended to Shipping and Aviation in 2020
More flexibility in the usage of Protected Cell Companies has been demonstrated by recent developments in Malta. Before their recent expansion into other markets like securitisation and captive risk finance, PCCs were mostly utilised for insurance and reinsurance. With the Securitisation Cell Company (SCC) legislation, Malta has expanded the PCC framework and made it possible for businesses to use the protected cell structure for a variety of asset and risk management tasks. By preventing cross-contamination between creditors and investors, this addition improves the preservation of distinct assets under the same umbrella. In the “hard” insurance market, where businesses would rather manage risks in-house than rely entirely on outside insurance carriers, PCCs have become more and more popular. As a result, more captive PCCs have been established, with many businesses establishing PCC facilities in Malta. These arrangements comply with the EU’s Solvency II regulatory framework while offering organisations cost-sharing and speedier setups.
Furthermore, in response to the increasing demand for captives, especially in specialised markets with limited access to traditional risk transfer mechanisms, the Malta Financial Services Authority (MFSA) has instituted fast-track licensing for captives.
In addition, developments in Malta’s legal framework for cell companies have extended the use of the Protected Cell Company structure to the shipping and aviation sectors. This expansion came into effect with the introduction of the Companies Act (Shipping and Aviation Cell Companies) Regulations in June 2020. These regulations allow businesses in these sectors to use PCCs to segregate assets and liabilities, which is particularly useful for restructuring operations and ring-fencing different ventures or activities within a single company. This means that firms can manage different financial activities (e.g., leasing, chartering, or managing ships and aircraft) without needing to set up separate legal entities for each. This regulatory flexibility makes it easier and more cost-effective for shipping and aviation businesses to protect their various assets and manage risk across different ventures.
It is important to note that in 2024 there have been some changes to the PCC regulations in Malta that have introduced stricter rules on non-recourse agreements, asset transfers and the winding up of cells. These regulatory changes are designed to enhance the stability of the financial sector, but they may also reduce the operational flexibility that PCCs have historically enjoyed in Malta.
All things considered, Malta’s PCCs are still developing and are providing a wide range of financial services applications beyond their original insurance-focused origins.
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