Insurance Business (Jersey) Law 1996: The Jersey Mutual Insurance Society: Law drafting instructions to remove Jersey Mutual's exemption

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A decision made 7 February 2014:

Decision Reference: MD-C-2014-0022

Decision Summary Title :

Law drafting instructions to remove Jersey Mutual’s regulatory exemption

Date of Decision Summary:

4th January 2014

Decision Summary Author:

Director,

Finance Industry Development

Decision Summary:

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Type of Report:

Oral or Written?

Written

Person Giving

Oral Report:

N/A

Written Report

Title :

Law drafting instructions for an Amendment re Jersey Mutual

Date of Written Report:

4 February 2014

Written Report Author:

Director,

Finance Industry Development

Written Report :

Public or Exempt?

(State clauses from Code of Practice booklet)

Public

Subject:

Jersey Financial Services Commission (“JFSC”): law drafting instructions to remove Jersey Mutual’s exemption from the Insurance Business (Jersey) Law 1996 (“IBJL”).

Decision(s):

The Chief Minister confirmed that he was content for the law drafting instructions regarding the removal of Jersey Mutual’s exemption from the Insurance Business (Jersey) Law 1996 to be passed by the JFSC to the Law Draftsman for action.

Reason(s) for Decision:

The attached law drafting instructions were sent to the Law Draftsman on 22 November 2013. The Law Draftsman has recently advised us that a Ministerial Decision now needs to be made for all law drafting that is required.

Summary

When the Insurance Business (Jersey) Law 1996 (“IBJL”) was enacted, Jersey Mutual was granted an exemption from having to register under the law (by virtue of Article 5(5)(d)).

This exemption was commented on negatively by the International Monetary Fund (“IMF”) in its 2008 assessment of the Island’s financial regulatory standards. The IMF recommended that, “the scope of exemptions from the IBJL should be narrowed so that all insurers are required to be licensed and supervised by the JFSC.”

In response to that recommendation, the Commission has agreed with Jersey Mutual that the exemption in Article 5(5)(d) that it has historically relied upon should be removed. Indeed, Jersey Mutual is indeed now under voluntary supervision by the Commission.

The attached law drafting instructions request the Law Draftsman to remove the exemption.

Resource Implications:

As this is a minor amendment there are no significant resource implications.

Action required:

Provide confirmation to the JFSC that the Chief Minister is content for the law drafting instructions to be passed by the JFSC to the Law Draftsman for action.

Signature:

Position:

Chief Minister of Jersey

Date Signed:

Date of Decision (If different from Date Signed):

Insurance Business (Jersey) Law 1996: The Jersey Mutual Insurance Society: Law drafting instructions to remove Jersey Mutual's exemption

MEMO

From: Director, Finance Industry Development, Chief Minister’s Department

Date: February 2014

Law drafting instructions for an Amendment re Jersey Mutual

Issue

1. An amendment is required to remove the exemption from regulation that currently applies to Jersey Mutual.

Instructions

2. The Jersey Mutual Insurance Society (“Jersey Mutual”) – then known as the Jersey Mutual Fire Insurance Society – was incorporated by an Act of the States passed on 13 February 1908, and sanctioned by Order of 9 April 1908, of their Lordships the Chancellor and the Lord President of Council, acting for and on behalf of His Majesty and being authorised thereto by writing under His Majesty’s Sign Manual. At this time, legal effect was given to the Fundamental Rules of the Society, which continue to be embodied by statute.

3. When the Insurance Business (Jersey) Law 1996 (“IBJL”) was enacted, Article 5(5)(d) was principally included for the purpose of exempting Jersey Mutual from the requirement to be ‘licensed’ (i.e. hold a permit) under the IBJL.[1] That Article exempts, “insurance business which is carried on under authority of an enactment other than [the IBJL] or the Companies (Jersey) Law 1991”.

4. This exemption was commented on negatively by the International Monetary Fund (“IMF”) in its 2008 assessment of the Island’s financial regulatory standards. The IMF recommended that, “the scope of exemptions from the IBJL should be narrowed so that all insurers are required to be licensed and supervised by the JFSC.”

5. In response to that recommendation, the Commission has agreed with Jersey Mutual that the exemption in Article 5(5)(d) that it has historically relied upon should be removed. (Jersey Mutual is indeed now under voluntary supervision by the Commission.)

6. Although the exemption in Article 5(5)(d) - by virtue of the way it is drafted - could potentially be used by insurers other than Jersey Mutual, the Commission has no evidence to suggest that it is in fact so relied upon by any other insurer. In any event, the exemption needs to be removed in whole to comply with the IMF’s recommendation.

7. The purpose of this memorandum is to request the drafting of a brief amending law to delete Article 5(5)(d) from the IBJL and additionally, to address the very small risk that that an insurer unknown to the Commission is relying upon the exemption, to include in the amending law a transitional provision. This would give an insurer (other than Jersey Mutual) 6 months after the coming into force of the amendment in which to make an application for the necessary permit.

8. We would respectfully ask if this amending law could be dealt with in short order as an amendment of a “minor or routine” nature with the JFSC instructing the draftsman and the working on the draft.

Director, Finance Industry Development, Chief Minister’s Department

[1] Indeed, Article 5(5)(d) merely continued an equivalent provision found in its predecessor law, the Insurance Business (Jersey) Law 1983.