BCR Publishing
We are the leading provider of news, market intelligence, events and training for the global receivables finance industry.
Working with industry leading organisations, experts, governments and universities, BCR Publications delivers expertise in factoring, receivables and supply chain finance to a global audience.
BCR has long been a beacon of innovation and excellence in the realm of receivables finance, playing an instrumental role in shaping the industry’s international landscape. Through its comprehensive conferences, insightful publications, and thought leadership, BCR has facilitated crucial dialogues and connections among industry professionals, driving forward the development of receivables finance globally.
Follow BCR Publishing
Free passes
For corporate treasurer roles/functions!
Kyriba Webinar: Modernising Global Corporate Payments to Prevent Fraud
04-11-2020 | treasuryXL | Kyriba |
These last few months have highlighted that Payments Fraud continues to be a major problem, with fraudsters quick to leverage the global pandemic, with the amounts involved considerable.
In this session Kyriba’s Paul Simpson will be joined by Helen Alexander from SWIFT and James Bushby from MasterCard, to explain what institutional payment fraud is, with a specific focus on the technology and processes that treasury and finance teams can employ to minimise risk.
In particular, the agenda will follow:
Register your place by filling in the form to your right and we will be in touch!
Date:
November 12th, 09:30- 10:30 (CET)
Contact:
Alternative Risk Finance Part 3 – Cell Company 101
| 02-11-2020 | Mark Roelands | treasuryXL
The introduction to a most utilized form and key alternative to a traditional captive
As described in this series: an in-house insurer can be of great added value to your company. In the current hard insurance market, the possibility to utilize an own vehicle instead of the turbulent market is a direct and tangible benefit. But it is not a free alternative, the cost of setup of an insurer and operating it in a compliant manner might be too high to generate an overall positive business case. That issue is being addressed in utilising a centralised facility taking care of a.o. most of capitalisation and compliance matters, while the risk taker can operate an in-house insurer. This light-weight route is what can be named a “Cell Company”.
A Protected Cell Company, Incorporated Cell Company, Segregated Accounts Company, Segregated Portfolio Company are all different names for a centralised facility each buidling on local legislation, which we will collectively name “Cell Companies”.
In this part of the series of Alternative Risk Financing the generalised concept of a Cell Company is described.
Structure explained
Where a fully-owned captive insurance entity imposes the full requirements on the parent company, the Cell Company utilises a centralised facility, a “Core”, which provides the infrastructure to be leveraged by multiple insurance entities. In the illustration the full hexagon is the Cell Company, with the Core representing the infrastructure.
The Small grey hexagons represent the Cells, which are segregated units within the facility and which belong to a specific client. Assets and Liabilities and legally segregated from other Cells and the Core. Cell A will for instance belong to Company A, while Cell B belongs to Company B. In most Cell Company structures the number of cells is not limited to 8 but is practically unlimited. In order to generate the segregation a split is made between Cellular Assets and Cellular Liabilies (the A-H hexagons) and non-cellular assets and liabilities (The Core).
Owning Cell A will enable a client to participate in an insurance program in a compliant manner, while building on the centralised facility which provides both a compliant governance structure, as well as the required capital amount.
As an individual client a key requirement however is to fund the ‘risk gap’, any open underwriting exposure being retained by the Cell needs to be collateralised somehow. Either via a guarantee. Letter of Credit, Capital or perhaps reinsuring more of the cover. This also ensures that each cell is able to sustain itself.
Key question: Is it safe?
Leveraging on the infrastructure of another company, which also facilitates other companies raises the obvious question: is it safe? Are my funds secure, and can I be held liable for the liabilities of other companies?In short: Yes it is safe … but …it builds on carefully drafted agreements, hence careful due diligence is required.
Basically, it comes down to default legislation of the domicile involved. In the Netherlands for instance there is no separate legal form of a Cell Company, and legal segregation critical fort he structure cannot be achieved. In Malta the for instance the “Cell Companies Act” recognizes the type of entity and segregation involved. A recent Montana case also recognized the structure including legal segregation.
Domiciliation
As mentioned several times, in order to make use of a Cell Company, legislation needs to be in place recognizing this particular form of a captive. Domiciliation is one of the the key considerations when an alternative risk finance structure is considered, as has been explain in Part 1 and Part 2 of this series.
In the Netherlands the required legislation for a Cell Company is not available. Within Europe therefore either Malta, Guernsey, Isle of Man or Gibraltar needs to be utilised. With Malta having the edge being within the EU. Ireland and Luxemburg have hinted on establishing Cell Company legislation as well, but Brexit (and moving insurance companies into these domiciles) has shifted supervisory priorities and no information has been published on any plans for a few years now. While Vermont is often the go to domicile within the US, there are more States with Cell Company legislation like Montana. Establishing a Cell Company close to an office of your company could be regarded to be beneficial. Vermont however does have an extensive captive servicing industry which is also a benefit.
Within Asia Vanuatu or Labuan would be interesting domiciles and the popular captive domiciles of Bermuda and Cayman Islands also both enable Cell Companies, and both have a solid supporting industry. This however needs to pass tax requirements in the organisation.
What’s next?
In Part 1 and Part 2 Captive Insurance and Building the Business Case is described. A Cell Company can possibly allow a business case to be positive, as the cost of operating and capitalising the Company is much lower then a fully-owned Solvency II compliant Insurance company. For building the business case please review Part 2, but when considering a Cell Company also take the following into consideration:
This may unlock the potential for an in-house insurer allowing you to pool your risks centrally and finance them in the most efficient manner, while operating in the most light weight manner.
Check my previous blogs of this serie:
Mark Roelands
Risk and Compliance Specialist
US Election: how would Democratic and Republican victories impact the US dollar?
29-10-2020 | treasuryXL | XE |
Regardless of the winner, there will be motion in the currency markets. Are you prepared?
In just one week, the 2020 United States presidential election will draw to a close.
While many are making their predictions based on recent polling data, as time has shown (just look at the 2016 election), the polls are not definite, and the United States could conceivably see a victory for either Biden or Trump.
Whatever the result of the election may be, it will likely cause movement in the currency markets, and lead to changes in the value of the US dollar (and potentially other world currencies as well).
Volatility in the currency markets can dramatically impact individuals and businesses alike. Are you prepared for what could happen?
How will a Biden win affect the dollar?
In our previous post on the topic, here’s what we had to say:
Even today, you’ll see conflicting forecasts regarding a Biden victory. Some maintain that a Biden victory will lead to a drop in the dollar’s value. Earlier this month, the dollar fell to a nearly three-week low (its second straight week of downward motion), with many attributing its drop to increasing expectations of a Biden victory. Others believe that the greater uncertainty toward the Biden administration’s attitude toward the dollar may result in greater volatility.
However, others have stated that a Biden victory would be the “best possible outcome” for the dollar seeing as, between 1980 and 2016 (but excluding the 1984 and 2008 elections), the dollar rose an average of 4% following Democratic victory, as opposed to the average 2% jumps when Republicans were victorious. Additionally, many investors are reducing their bets on extreme currency market volatility in the event of a Biden victory.
What will happen to the Dollar if Trump wins?
After Trump’s victory in the 2016 election, the dollar did rise, and some predict that it will do so again. However, the US dollar Index has dropped more than 7% since his inauguration in 2017. Yet on the other hand, as stated above, the dollar does tend to strengthen immediately following a US presidential election, regardless of who wins (in fact, only 1 of the 10 elections since 1980 saw a drop). Many still predict a stronger dollar following a Trump victory, due to the administration’s support for fiscal stimulus as well as the fact that there would be less uncertainty in reelecting Trump over electing a new president.
What else?
Due to the much higher-than-usual frequency of mail-in ballots and early voting during this particular election, it’s possible that the winner will not be announced on Tuesday November 3, and will be delayed by a few days or more. A delayed announcement or a contested winner would extend the period of uncertainty, and almost certainly lead to a fall for the dollar.
Get in touch with XE.com
About XE.com
XE can help safeguard your profit margins and improve cashflow through quantifying the FX risk you face and implementing unique strategies to mitigate it. XE Business Solutions provides a comprehensive range of currency services and products to help businesses access competitive rates with greater control.
Deciding when to make an international payment and at what rate can be critical. XE Business Solutions work with businesses to protect bottom-line from exchange rate fluctuations, while the currency experts and risk management specialists act as eyes and ears in the market to protect your profits from the world’s volatile currency markets.
Your company money is safe with XE, their NASDAQ listed parent company, Euronet Worldwide Inc., has a multi billion-dollar market capitalization, and an investment grade credit rating. With offices in the UK, Canada, Europe, APAC and North America they have a truly global coverage.
Are you curious to know more about XE?
Maurits Houthoff, senior business development manager at XE.com, is always in for a cup of coffee, mail or call to provide you detailed information.
Visit XE.com
Visit XE partner page