Paul Scrivener, head of the Insurance Group at Cayman Islands law firm, Solomon Harris, takes a look at some of the challenges of using segregated portfolio companies.
Protected cell legislation exists in a number of jurisdictions around the world with the major offshore jurisdictions taking the lead in this respect. The concept is relatively straightforward. A particular type of company can be incorporated which is able to create one or more cells in order to ring-fence pools of assets and liabilities within the company. Generally, a creditor dealing with one particular cell can only have recourse to the assets of that cell and is denied recourse to the assets of other cells or the general assets of the company. The Cayman Islands insurance industry, in particular, has been keen to utilize the vehicle but what are the drawbacks and the challenges?
