Invitation for the Assistant Minister to comment upon two Insurance Company Transfer Schemes.

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A decision made (20/04/2006) regarding invitation for the Assistant Minister to comment upon two Insurance Company Transfer Schemes.

Subject:	Invitation for the Assistant Minister to comment upon two Insurance Company Transfer Schemes
Decision Reference:	MD-E-2006-0068		Exempt clause(s):	N/A
Type of Report: (oral or written)	Written		Person Giving Report (if oral):	N/A
Telephone or e-mail Meeting?	N/A		Report File ref:
Written report – Title	Two Insurance Company Transfer Schemes
Written report – Author (name and job title)	Paul de Gruchy, Finance Industry Executive
Decision(s): To notify the Jersey Financial Services Commission that the Assistant Minister has no comments to make in respect of the transfer schemes and to ask the Commission to prepare law drafting instructions to amend the Insurance Business (Jersey) Law so as to remove the requirement that the Minister / Assistant Minister be requested to consider such schemes prior to such schemes being put before the Royal Court for approval.
Reason(s) for decision: The Minister / Assistant Minister relies on the conclusions of the Commission, based upon an actuarial report, to the effect that policyholders will not be prejudiced by the two transfer schemes. As the Minister / Assistant Minister habitually relies upon this technical advice, it is felt that there is little purpose served by the requirement that the Minister / Assistant Minister be consulted on such matters and that the Commission is the best placed entity to ensure that the wider public and the Island’s reputation are protected when considering proposals in respect of any transfer of insurance business.
Action required: PDG to notify Commission that the Minister / Assistant Minister has no comment to make and that the Royal Court be informed that he has no objections or comments to make in respect of the two transfer schemes. PDG to further request that the Commission draw up law drafting instructions to amend the Insurance Business (Jersey) Law so as to remove the requirement that insurance business transfers and similar transactions are referred to the Minister / Assistant Minister.
Signature: Deputy Alan Maclean (Assistant Minister)		Date of Decision: 20 April 2006

Invitation for the Assistant Minister to comment upon two Insurance Company Transfer Schemes.

MINISTER FOR ECONOMIC DEVELOPMENT

TWO INSURANCE COMPANY

TRANSFER SCHEMES

1 THE ISSUE

1.1 Under the provisions of the Insurance Business (Jersey) Law 1996 (the “Insurance Law”), when an insurance company holding a permit under that law wishes to transfer its assets and liabilities to another insurance company a Formal Transfer Scheme (a “Scheme”) must be produced for the approval of the Royal Court. The law provides for the Scheme to be reviewed by the Minister, and for the Minister to make such representations to the court as it considers desirable.

1.2 Under one such Scheme, it is proposed that the long-term insurance assets and liabilities of PPP Lifetime Care plc and Sun Life Pensions Management be transferred to AXA Sun Life plc.

1.3 Under a second such Scheme, it is proposed that the general insurance assets and liabilities of Aioi Insurance Company of Europe be transferred to Aioi Motor and General insurance Company of Europe Limited.

1.4 The purpose of this Paper is to recommend that the Minister agrees that he has no objections or observations to make in respect of the two Schemes. The Paper goes on to recommend that, as in considering such Schemes the Minister will be reliant upon the technical expertise of the Jersey Financial Services Commission, there is little value added in requiring the Minister to be consulted before Schemes are considered by the Court, and that the Commission be asked to prepare law drafting instructions in relation to the Insurance Law so as to remove the requirement that Schemes and similar transactions are referred to the Minister.

2 BACKGROUND

2.1 The Background to the two Schemes are set out in sections 3 and 4 of the two annexes to this paper, which were prepared by David Hart of the Financial Services Commission.

2.2 In summary, the purpose of both of the Scheme is to rationalise the structure of the insurance group in question so as to bring about administrative savings. This is a common practice in the insurance industry, where, as a result of takeovers, mergers and increasing globalisation, cost savings can often be found through rearranging the corporate structures through which such business is carried out.

2.3 The Commission has carried out a review of the documentation intended to effect both Schemes, and has noted the contents of an actuarial report into the same. The Commission is of the view that, according to the terms of each Scheme, Jersey policyholders and members will be treated in the same way as those in other jurisdictions, and their long-term expectations from their policies will not be diminished or jeopardised.

2.4 It should also be noted that, as is often the case with Schemes of this type, the Royal Court will be asked to consider derogations from the provisions of the Insurance Law in relation to the manner in which policy holders are to be notified of the proposals and the information which will, at first instance, be sent to policyholders.

3 ISSUE AND RECOMMENDATION

3.1 It is recommended that the Minister accepts the observations of the Commission and agree that, should the opinion of the Minister be sought by the Royal Court, a representative of the Commission be asked to inform the Court that the Minister has no objections or comments to make in relation to either of the proposed Schemes or the derogations from the Insurance Law requested in respect of either Scheme.

3.2 The Minister is currently asked to comment on perhaps 10-15 Schemes each year. In every case, the Insurance Division of the Commission has reviewed the Scheme in detail and reviewed an actuarial report produced in relation to the Scheme. Each Scheme is merely a set of proposals to be placed before the Royal Court for approval and thereafter usually being sent to the relevant policyholders for their approval. There are therefore a number of safeguards in place to ensure that any Scheme is not contrary to the public interest, potentially damaging to the reputation of the Island or prejudicial to policyholders in Jersey.

3.3 Such Schemes are, by their very nature, complex and highly technical, and can only be evaluated by those familiar with insurance business practices and actuarial approaches to insurance business. It is not realistic to expect the Minister or his officers to do anything other than adopt the conclusions of the Commission in relation to any particular Scheme. It is therefore recommended that the Commission be asked to prepare law drafting instructions in relation to the Insurance Law so as to remove the requirement that Schemes and similar transactions are referred to the Minister.

PAUL DE GRUCHY

Finance Industry Executive

19 April 2006