In September 2026, the BMA published a Guidance Note (the 'SAC GN') under section 2B of the Insurance Act 1978 (the 'Insurance Act') for insurers that maintain segregated accounts under the Segregated Accounts Companies Act 2000 or separate accounts permitted for insurers incorporated under a private act (together, 'cells').
The SAC GN clarifies the BMA’s expectations regarding the establishment, governance, operation and reporting of cells, and aims to ensure that policyholders of cell structures receive an appropriate level of protection consistent with that provided to policyholders of insurers that do not use cells. The SAC GN will come into effect on 1 January 2027 and applies to financial years commencing on or after that date.
Key provisions include the following:
(a) Governance: the Board of Directors remains responsible for oversight of cell operations, fitness and propriety assessments, outsourcing (including services provided by account owners or participants), and KYC, due diligence, ongoing risk-based monitoring, sanctions, suspicious activity reporting and AML/ATF controls for all cell participants, sponsors and capital/collateral providers. The governance framework and composition of the Board should also mitigate reliance on, and conflicts of interest involving, account owners and participants. Governance and oversight responsibilities, including responsibility for outsourced functions, cannot be delegated.
(b) Licensing: applications must include cell-level documentation, capital flows, including contingent forms of capital, top-up arrangements and limited-recourse language, and the business plan must show that cell business will be fully collateralised or fully funded. Where information about proposed cell business is unavailable at the licensing stage, the insurer must provide the relevant update to the BMA before commencing that business. An insurer intending to write all its business through cells will generally be subject to a registration condition requiring prior written approval before conducting insurance business through its general account.
(c) Funding: each cell must meet the relevant solvency requirements on a stand-alone basis and maintain capital and liquidity appropriate to the risks it assumes, independently of the wider SAC structure. Examples of acceptable-quality funding or financial support include cash, collateral in trust, reinsurance with carriers rated A- or better by AM Best, S&P or a similar approved rating agency, and approved contingent capital such as evergreen and irrevocable letters of credit or other instruments approved by the BMA. Evergreen and irrevocable letters of credit are acceptable where the issuer is a regulated financial institution that is rated at least A- or is otherwise considered by the BMA to be of sound financial quality. BMA approval is also required for a letter of credit to be reported on Form 8 as statutory capital and surplus. Speculative or low-quality instruments, receivables other than specified net-premium set-off or funds-withheld arrangements, and reliance on limited-recourse language in place of actual capital or collateral are not acceptable. For these purposes, 'fully funded' refers to financing up to the reserve provision, while 'fully collateralised' refers to financing up to the full maximum aggregate exposure under the relevant contract. Collateral supporting fully collateralised business must be contributed to the cell on or before the effective date of the insurance contract, and contractual top-up mechanisms must be clearly and expressly documented.
(d) Reporting: a Schedule of Segregated Accounts forms an integral part of the annual statutory financial statements and filing. Although the Schedule is outside the scope of the statutory audit, it is subject to separate agreed-upon procedures performed by the approved auditor, with the AUP report filed concurrently with the annual Statutory Financial Return as a separate attachment. The AUPs comprise annual procedures and certain procedures performed on a rolling five-year cycle. The Schedule must also contain an annual Principal Representative attestation confirming management’s responsibility for the accuracy and completeness of the Schedule.
(e) Loss Reserve Specialist opinions: waivers will be assessed on a case-by-case basis and, where granted, are granted annually and generally renewed annually for so long as the relevant risk-mitigation factors remain in place. The BMA generally approves applications where cells are fully collateralised to policy limits, or fully funded and supported by reinsurance covering the business to policy limits, and no insurance business is written through the general account.
(f) Return of capital: prior approval is required under section 31C of the Insurance Act for distributions that would result in a reduction of more than 15% of the statutory capital reported at the previous year-end, and a notification is required within 14 days after the reduction for cell-level reductions exceeding 15% of the relevant cell’s capital that do not meet the section 31C threshold. Any more restrictive condition on the insurer’s registration concerning dividends, distributions or returns of capital continues to apply.
(g) Material changes: specified changes, such as new risks, material changes to insurance, collateral or ancillary contracts changes to material disclosures made in the original application, and new capital providers or cell participants not previously identified or contemplated, must be notified to the BMA and, where sections 30JA and 30JB of the Insurance Act apply, receive prior supervisory approval. A succession of individually minor changes may, taken together, constitute a material change requiring notification.
Entities affected
The guidance note applies to limited-purpose and commercial insurers in the general business licence classes that use segregated or separate accounts. The SAC GN does not apply to long-term insurers and incorporated segregated account companies and incorporated segregated account insurers remain subject to a separate December 2020 guidance note. The Special Purpose Insurer ('SPI') guidance note takes precedence for insurers registered as SPIs where the two guidance notes are inconsistent.
Key considerations
Affected insurers should, ahead of 1 January 2027, review cell funding and collateral arrangements, top-up provisions, letters of credit, board composition and conflict management, distribution processes and statutory reporting workflows, including the new AUP and Principal Representative attestation requirements. They should also confirm that collateral supporting fully collateralised business will be contributed by the relevant insurance contract’s effective date and that contractual top-up mechanisms are sufficiently explicit and operationally executable. The BMA has indicated that it will consider applications of a transitional nature during the first year following implementation, but this should not be treated as an automatic transitional exemption or general grace period.
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