Approval of Insurance Business.

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A decision made (28/06/2006) regarding Approval of the Insurance Business (Amendment No. 5) (Jersey) Law 200-.

Subject:	Insurance Business (Amendment No.5) (Jersey) Law 200-
Decision Reference:	MD-E-2006-0113		Exempt clause(s):
Type of Report: (oral or written)	Written		Person Giving Report (if oral):
Telephone or e-mail Meeting?			Report File ref:
Written report – Title	Insurance Business (Amendment No.5) (Jersey) Law 200-
Written report – Author (name and job title)	Paul de Gruchy, Director, Finance Industry Development
Decision(s): To approve the Insurance Business (Amendment No.5) (Jersey) Law 200-, and instruct the Director, Finance Industry Development, to notify the Publications Editor and the Assistant Greffier of the States that the Amendment can be lodged for consideration by the States at the earliest opportunity.
Reason(s) for decision: The changes proposed will replace an existing provision of the Law that requires the Royal Court to ask, when faced with an application for the transfer of insurance business in Jersey, whether the Minister has any comment to make with a requirement that that question be addressed to the Commission. This is sensible, as insurance business is a highly technical area, and only the Commission has the expertise required to evaluate the actuarial report in relation to an insurance transfer and form a view as to whether existing policy holders in Jersey are adequately protected within the proposal. The Commission and the Court will provide natural safeguards to ensure that such persons are not prejudiced by any transfer.
Action required: Paul de Gruchy to request the Publications Editor and the Assistant Greffier of the States to lodge the draft amendment with a view to the amendment receiving States approval at the earliest opportunity.
Signature: Senator Philip Ozouf (Minister)		Date of Decision: 28 June 2006

Approval of Insurance Business.

MINISTER FOR ECONOMIC DEVELOPMENT

Insurance Business (Amendment No.5) (Jersey) Law 200- (the “Amendment”)

1 THE ISSUE

1.1 Under the Insurance Business (Jersey) Law (the “Law”), persons carrying out certain types of insurance business from or within Jersey are required to hold a permit issued under that law. In the event that a permit holder wishes to transfer its insurance business to another entity, the consent of the Royal Court is required. As part of the process of seeking consent, the Minister is currently invited to comment on the proposed transfer. Following an earlier decision of the Minister to this effect, it is proposed that this requirement be changed, so that it is the Jersey Financial Services Commission (the “Commission”) that is given the right to comment on any proposed transfer of insurance business.

2 BACKGROUND

2.1 The procedure governing the manner in which a transfer of insurance business is conducted in Jersey is set out in Schedule 2 of the Law. In brief, the procedure requires the consent of the Royal Court, and in the course of considering an application, the court will ask whether the Minister has any views on the subject. One purpose of this requirement is to provide the possibility of intervention on behalf of the public interest in the event that the proposal was potentially disadvantageous to existing policy holders.

2.2 The transfer of insurance business from a permit holder under the Law is invariably a complex matter. It will usually be the result of a merger of insurance companies or an intra-group rationalisation and often involves transfers in a significant number of jurisdictions, all of which must be co-ordinated.

2.3 In order to ascertain whether existing policy holders remain adequately protected following the proposed transfer, it is necessary to commission and study an actuarial report in relation to the insurance companies in question. This is evaluated by the Commission (along with the regulatory authorities in any other jurisdictions where the transfer will have effect), which will then make recommendations in relation to the proposed transfer to the Minister. In practice, the Commission will work closely with the Jersey legal advisers to the insurance companies concerned and is unlikely to make a recommendation to the Minister until it is satisfied that the transfer provides appropriate safeguards in relation to existing Jersey resident policy holders.

2.4 The Minister is reliant upon the technical advice received from the Jersey Financial Services Commission in relation to any proposed insurance transfer. Given the specialist nature of insurance business generally, it is difficult for the Minister or his officers to critically evaluate the advice given by the Commission. Experience has shown that invariably, the Minister (and his predecessor, the Economic Development Committee) adopt the recommendations of the Commission and request that the Commission inform the Royal Court that the Minister has no comment to make in relation to the proposed transfer.

2.5 This being the case, the Amendment recommends amending Schedule 2 of the Law to require the Royal Court to ask the views of the Commission, rather than the Minister, in relation to proposed transfers of insurance business. This change simply reflects the reality of existing practice: namely, that the Commission is best placed to provide advice to the Royal Court on the potential prejudice caused to existing policyholders by the proposed transfer. The Commission and the Royal Court will both provide safeguards to ensure that policyholders are not prejudiced by any transfer scheme.

2.6 The Amendment also takes the opportunity of including a provision in the Law permitting subsequent changes to the Schedules to the Law to be made by Regulations.

3 RECOMMENDATION

3.1 It is recommended that the Minister approve the Amendment, and instruct the Director, Finance Industry Development, to notify the States Greffe and request that the Amendment be tabled for consideration by the States at the earliest opportunity.

PAUL DE GRUCHY

Director, Finance Industry Development

26 June 2006

ANNEX