Protected cell captive
A protected cell captive is a captive insurance structure divided into legally separate cells, so each participant's assets and liabilities are ring-fenced from the others.
A captive is an insurer owned by the business or businesses it insures. In a protected cell captive, a single core company holds multiple cells, and the law keeps the assets of each cell walled off from the others. The NAIC describes protected cell captives as similar to rental captives, except that the assets of each user are protected from one another by law.
This structure lets smaller organizations access the benefits of a captive, such as tailored coverage and potential cost savings, without forming and capitalizing a standalone insurer. A sponsor can add cells for different participants or lines of business while keeping each one financially separate, which contains the effect of a bad loss year in any single cell.
For example, several unrelated companies might each use a cell within one protected cell captive to insure their own risks, confident that a large claim in another company's cell cannot be paid from their funds.
Definitions are educational and general, and specific contracts, endorsements, and state rules may modify them. For regulatory guidance, refer to the NAIC or the Insurance Information Institute.