Accounting for third-party cell facilities by insurers

November 22nd, 2011 by Friedel Coetsee Friedel Coetsee

Research by cell captive car insurance companies have shown that the newest Financial reporting standards and implementation thereof has been full of its own problems and difficulties. In the case of third party cell captive insurance, this has been found to be nothing but the truth.

Accounting for cell facilities were found to be an important factor when talking about accounting within the insurance world. When this was discussed, it was found that a set of principles were needed that would allow for consistent accounting amongst insurers. The problem was that this was a strange concept to the rest of the world. It was also then seen that only one option was not going to be enough if a change was to be brought on.

Here are some descriptions on exactly what third party cell captive insurance is:
A registered cell insurer will give a number of shares to a corporate company and under an agreement, the corporate company will be entitled to the cell shares as it so be of an advantage to him. The disadvantage though would be that the cell shareholder would also be accountable for any loss that may happen from the insurance company being introduced to the insurer. Here are some functions of third party cell captive insurance:

The shareholder of the cell will earn a return on investment from the assets.
The insurer will account for the shares and investment activities of each of the shareholders’ cells.
All the policies given out by the cell insurer will have to meet the standards of a general insurance contract.
A cell has no legal status which makes the insurer the contracting party. The insurer will therefore charge an admin fee for providing the cell facility.
The insurer will also be responsible for all the decisions but the investment return will be the responsibility of the cell.
The insurer has the power to claim against the cell shareholder, should any loss or damage incur. That makes the insurer vulnerable to credit risk.
Dividends can be paid over to the cell shareholder, should the insurer see fit to do so.

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