Bermuda is proposing to introduce "segregated cell'' legislation for the insurance industry, Registrar of Companies Jeremy Cox has told a leading overseas magazine.

Such legislation has been introduced elsewhere, most noticeably in the Cayman Islands, which has seen a surge of new business as a result.

Segregated, or protected, cells allow an insurance company or manager to maintain within its records an individual account for a particular policy, group of policies or client, shielding it from the general business of the insurance company.

The process has proven especially useful in life assurance, which comprises 58 percent of the global insurance total of insurance in force. Cayman Islands insurers, with whom Bermuda is now playing catch-up, have been able to operate with a much broader range of securities, probably with a higher risk tolerance, than comparable annuities in the United States.

"The segregation also allows a substantial gain to fall within that segregated account, which would not be available under a policy in the United States,'' said Ian Kilpatrick, president and chief executive officer of Crusader International Management in the Caymans. "It's this flexibility of investment that has driven the considerable interest in variable life and variable annuity policies in the Cayman Islands over the last few years.'' Mr. Cox told Risk & Insurance: "We are seeing a lot of interest in separate cell legislation.'' Such a policy would allow insurance managers to maintain specific assets for specific clients, thereby protecting the individual companies from the general performance of the market or the manager.

"Bermuda has always had the ability, via a `private Act' of the Legislature, for a company to tailor things in structuring itself,'' said Mr. Cox. "The private Act has been a function of Bermuda's flexibility. Now we are proposing to put legislation in place to deal with the desire for separate cells, so that companies will still have the private Act but also a law in place so that if you have a very simplistic structure (for a separate cell captive) you can get it up and running very quickly.'' Jeremy Cox