Segregated Accounts Registrations

Legislation

The Segregated Accounts Companies Act 2000 (‘the Act’) permits Bermuda companies to operate segregated accounts or “cells.” The Act provides for any company (whether an insurance or non-insurance company with the consent of the Minister of Finance) to apply under Section 6 to be registered under the Act.

The segregated account or cell established on behalf of each participant is protected by Bermuda law against claims asserted against the company and participants in other cells. In other words, a participant in the company must only pay for claims arising from its own losses, not those of other participants. However, if the cell is owned by more than one participant, then the participants will share pro rata in each other’s losses or on some other agreed upon basis. In no circumstances will a general creditor of the company be able to attach any participant’s account.

A company that operates segregated accounts under the authority of a Private Act is not required (i.e. not mandatory) to register under the Public Act. However, such a company is required to give notice to the Registrar of Companies on or before 31 April 2001. This notice of the company’s right to operate segregated accounts must have attached a copy of the Private Act conferring the right and a copy of the company’s most recent audited financial statements.

A company that operates segregated accounts under the authority of a Private Act may register under section 8 of the Public Act. Where such a company has registered, the Registrar of Companies may impose such conditions on the registration of the company as he considers necessary to ensure compliance with the Act, the sufficiency of the vetting procedures for the beneficial owners of segregated accounts and the reputation of Bermuda. Further, if inconsistencies arise between the provisions of the Act and those of the relevant Private Act, the provisions of the Act will prevail.

Rent-a-Captives

A Bermuda licensed insurance company may be established to offer “Rent-a-Captive” services. This can be achieved by registering the insurer under the Public Act or by Private Act. In both cases, such registration permits companies to be registered as “segregated account” companies.

In either case, whether registered under the Private Act or under the Act, an insurer may establish legally segregated separate accounts for Contracts of Insurance issued which will, amongst other things, protect the premium and related income from such Contracts of Insurance from the claims of general creditors of the Company or other insureds. In the absence of such powers, the premiums received by the Company are generally commingled and would be available to meet all claims against the Company without matching a claim to a particular premium payment or Contract of Insurance. The separate account feature that is provided by a Private Act offers the insureds the security that the premium and subsequent investment income attributable to their program will not be utilized to meet claims arising on other programs. In the context of Rent-a-Captive companies this special feature is important because it provides the Company and the insureds with a structure that helps meet each Insured’s specific needs and at the same time provide the desired protection.

Other Companies

The formation of companies with segregated accounts is permitted under the Public Act with the consent of the Minister of Finance. The additional feature of this approach is that it provides not only for the issuance of Securities (example: preferred shares) in order to confer rights with respect to a Separate Account for purposes such as returning profits from that account but enables it to be done also through contractual agreements such as Participation, Accountholder and Contingent Agency Commission Agreements.

In recent years, mutual funds and eCommerce companies have been established in Bermuda under the Act to offer segregated accounts to users.

Registration Procedures

The Act requires that any company seeking to be registered under the Act shall make an application that contains the following:

  • The name of the company which, subject to a direction from the Minister pursuant to Section 26, shall include the expression “SAC”
  • A statement that the company intends to operate segregated accounts
  • The address of the registered office of the company
  • The name and address of the segregated account representative of the company
  • The nature of the business of the company
  • The date of incorporation of the company
  • A statement that the company has made provisions to account for segregated accounts in the manner set out in Section 16

For further information and legal assistance with registration procedures, please contact our office.