Segregated Accounts Companies – A Historical Perspective

RACs were first developed in the 1970s as a quick, simple way of setting up a self-insurance program in a captive. Using a RAC avoids the time and expense of incorporating a separate company and instead the RAC rents its corporate structure, core capital and insurance licensing to each participant. Segregation of cells was achieved by the private contractual arrangements of each cell. However, there was no separate legal framework to support this and it was thought that such arrangements might not be effective against creditors in the event of liquidation.

During the 1990s the concept of private legislation to codify the segregation of accounts developed in Bermuda and a number of private acts were enacted for RAC companies. During this period the structure of these private acts changed as the concept of segregated accounts companies evolved and the UFIC Act is a distillation of that evolutionary process.