2018 Fall Question # 14

There is a bullet point in this question that describes net income amounts of protected cells and aggregate write-ins for underwriting deductions as being 0. I have a few questions about this bullet point. The first one is what exactly are protected cells? The second is if this amount is above 0 dollars what portion of Net Income would it be classified under? And finally, would you account for these as an added amount or a subtracted amount from what ever portion of NI that it is classified under?


  • I don't know why they included that piece of information. It's something nobody would even have thought about. But if that value isn't 0 then it should be subtracted from U/W income.

    First, the definition of protected cell:

    • A protected cell company is one that is separated into separate cells, each having its own assets and liabilities, but also having access to a part of the company’s overall capital. The liability to each cell is limited such that creditors to one cell cannot look to another cell or the company as a whole for assets. Only certain jurisdictions currently have insurance legislation pertaining to protected cell companies.

    And second, an entry related to protected cells appears 3 times on the Income Statement:

    • Line 7 under U/W income. (It is subtracted from the sum of lines 1 through 6 to get net U/W income. So activity regarding protected cells is distinct from other sources of U/W income.)
    • Line 23 under Capital and Surplus account (Transfers from protected cells contribute to surplus.)
    • Line 30 under Capital and Surplus account (Surplus can be contributed or withdrawn from protected cells and this also impacts total surplus)
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