Jersey Mutual Insurance Society, Incorporated (Alteration of Rules) (No. 7) (Jersey) Law 201-

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A decision made 7 March 2014:

Decision Reference: MD-C-2014-0035
Decision Summary Title :	Draft Jersey Mutual Insurance Society, Incorporated (Alteration of Rules)(No.7)(Jersey) Law 201-		Date of Decision Summary:	5 March 2014
Decision Summary Author:	Officer, Financial Services		Decision Summary: Public or Exempt? (State clauses from Code of Practice booklet)	Public
Type of Report: Oral or Written?	Written		Person Giving Oral Report:
Written Report Title :	WR - Draft Jersey Mutual Insurance Society, Incorporated (Alteration of Rules)(No.7)(Jersey) Law 201-		Date of Written Report:	5 March 2014
Written Report Author:	Officer, Financial Services		Written Report : Public or Exempt? (State clauses from Code of Practice booklet)	Public
Subject: Lodging of the Draft Jersey Mutual Insurance Society, Incorporated (Alteration of Rules)(No.7)(Jersey) Law 201-
Decision(s): The Chief Minister approved the Draft Jersey Mutual Insurance Society, Incorporated (Alteration of Rules) (No.7) (Jersey) Law 201- (the “draft Law”) for lodging and directed that the documents should be lodged au Greffe for debate by the States at the earliest opportunity.
Reason(s) for Decision: The draft Law replaces the Fundamental Rules of the Society by replacing the Schedule to the Jersey Mutual Insurance Society, Incorporated (Alteration of Rules) (Jersey) Law 1976. The draft Law also introduces an ability to amend the Schedule in the future by Regulations with the view that if a future change to the Fundamental Rules is required it will not have to be undertaken by a primary Law amendment. The changes made by the proposed new Rules include capping recourse to members to £5 per member in line with common practice in the UK, increasing the use of bye-laws to avoid the States needing to approve administrative changes, removing references to the Judicial Greffier that are no longer required and reducing investment capital restrictions as the rules of the regulatory laws will determine such matters.
Resource Implications: There are no resource implications for the States of Jersey as a result of this decision.
Action required: The Greffier of the States is requested to lodge the above matter 'au Greffe' for debate at the earliest opportunity.
Signature: Senator I. J. Gorst		Position: Chief Minister
Date Signed:		Date of Decision (If different from Date Signed):

Jersey Mutual Insurance Society, Incorporated (Alteration of Rules) (No. 7) (Jersey) Law 201-

FINANCIAL SERVICES

Chief Minister’s Department

5TH Floor, Cyril Le Marquand House, The Parade

St Helier, Jersey, JE4 8UL

Tel: +44 (0)1534 440449

CHIEF MINISTER

WRITTEN REPORT

Background

The Jersey Mutual Insurance Society (the “Society”) was incorporated by Act of the States on 13 February 1908. At this time, legal effect was given to the Fundamental Rules of the Society (“the Rules”) which continue to be embodied in statute. From time to time the Rules require amendment and this has occurred six times since 1908 – on the last occasion in 2010. This has previously occurred by the States adopting an amending Law further to a petition brought to the States Assembly. A Petition to amend the Rules was debated and adopted by the States Assembly under P108/2013 on 8 October 2013.

The Draft Jersey Mutual Insurance Society, Incorporated (Alteration of Rules)(No.7)(Jersey) Law 201- (the “draft Law”) replaces the Rules of the Society by replacing the Schedule to the Jersey Mutual Insurance Society, Incorporated (Alteration of Rules) (Jersey) Law 1976. The draft Law also introduces an ability to amend the Schedule in the future by Regulations with the view that if a future change to the Fundamental Rules is required it will not have to be undertaken by primary Law amendment.

The changes made by the draft Law include capping recourse to members to £5 per member in line with common practice in the UK, increasing the use of bye-laws to avoid the States needing to approve administrative changes, removing references to the Judicial Greffier that are no longer required and reducing investment capital restrictions as the rules of the regulatory laws will determine such matters.

A number of the changes made by the draft Law are as a result of the commencement of the Regulation of the Society by the Jersey Financial Services Commission (the “JFSC”) which was a recommendation following the IMF Report on Jersey in 2009. That Regulation commenced when the Society became a pemit holder under the Insurance Business (Jersey) Law 1996 on 25 February 2013. Further detail on the proposed amendments by the draft Law is detailed below.

Amendment to call on the members

Under the current Rules, in the unlikely event that the Society becomes liable for claims which are not covered under reinsurance policies and which cannot be paid from the capital of the Society, the Society can have recourse to its members to make up the insufficiency. The amendments by the draft Law limit the maximum liability of members in this regard to £5. This amendment is intended to promote fairness to the members and to reflect UK market practice.

Increased reference to the Bye-Laws

The Rules currently refer to the Society’s Bye-Laws adopted by the members in a general meeting (the “Bye-Laws”), which are, for instance, referred to in the context of the composition and duties of the Supervisory Committee. The draft Law has incorporated a number of further references to the Bye- Laws, for instance in Rule 2 of the Revised Rules, which states that provisions in respect of the Board of Administration will be set out in the Bye-Laws. The advantage of increasing the use of the Bye-Laws is that changes can be made to the Bye-Laws, for example to amend administrative procedures, by approval of the members, without the need for legislation adopted by the States of Jersey. In the modern day, this is clearly desirable for both the Society and the States of Jersey.

Amendments intended to decrease requirement for further revisions in the future

The draft Law amends a number of the existing Rules with the intention of decreasing the likelihood of this process having to be repeated in the near future. Key amendments in this regard make the Rules subject to the Society’s legal and regulatory obligations. This amendment is intended to ensure that the Society is not placed in the difficult situation where its legal or regulatory obligations are inconsistent with the provisions of the Rules. Amendments of this nature also include inserting flexibility in how: (i) minutes are kept (Rule 6); (ii) financial transactions are carried out and recorded (Rules 7 and 20); and (iii) notices are given and received (Rules 22, 23, and 29). These amendments are intended to allow for developments in the future (for instance if cheques cease to be a valid manner of making payments, and are replaced by another form of transfer not currently in use).

Removal of References to the Judicial Greffier

The Rules currently provide that certain filings will be made with the Judicial Greffier (for instance in Rule 22). It has been agreed, in consultation with the Judicial Greffier and the JFSC, that these filings will no longer be required now that the JFSC has commenced its regulation of the Society.

Investment of Capital made by the Society

In the current Rules, Rule 27 stipulates the type of investments that the Society can make with its capital. These restrictions have been deleted in the Revised Rules as it is the expectation of the Society that in the future investments will have to be made in accordance with the rules and regulations put in place by the JFSC.

In reviewing the Society’s application to become a permit holder under the Law, the JFSC gave careful consideration to the Society’s investment strategy. As a result, certain conditions were attached to the Society’s permit in addition to the provisions regarding investments and solvency contained within the Law, Orders and Codes of Practice. The JFSC considers that since the Society became regulated by the JFSC, the obligations of the Society regarding investments are considerably more comprehensive than those contained within the previous Rules.

Other amendments for consistency of terminology and to promote flexibility

A number of other amendments have been made to the Rules, which are designed to make the use of terminology in the Rules more consistent, and to promote flexibility.

Consultation

Consultation has occurred with the Society, their legal advisers and the JFSC. All parties are content for the draft Law to proceed for debate by the States Assembly.

Human Rights

The Law Officers Department have confirmed that the draft Law does not have any human rights implications. Therefore, no human rights notes will be annexed to the Projet.

Resource Implications

There are no resource implications for the States of Jersey as a result of this decision.

Recommendation

It is advised that the Chief Minister lodge the draft Law au Greffe and direct that it be listed for debate at the earliest opportunity.

Officer, Financial Services

5 March 2014