Introduction

1. This assessment of Jersey’s compliance with the International Association of Insurance Supervisors (IAIS) Insurance Core Principles (ICPs) was carried out as part of the 2008 FSAP Update. It updates and replaces the assessment conducted in 2002 (published in 2003) in the context of the Offshore Financial Center (OFC) assessment of the island. The assessor was Ian Tower of the IMF’s Monetary and Capital Markets Department. The assessment is based on information available at the time of the November 2008 mission, updated to reflect documented regulatory and economic developments since then.

Information and methodology used for assessment

2. The assessment was made based on information available in November 2008 at the time of the FSAP Update mission. The authorities contributed a full self assessment and further information in response to a pre-mission questionnaire. Full documentation, including all relevant laws and regulations were supplied.

3. The assessment took account of discussions with the Jersey Financial Services Commission (JFSC) in the course of the mission as well as meetings with government, insurance companies and managers of insurance companies, local representatives of the accountancy profession and a representative of a major audit practice. The assessor is grateful for the full cooperation extended by all.

4. The assessment was based on the 2003 version of the IAIS ICPs and Methodology. It took into account relevant IAIS standards and guidance in addition to the ICPs. The assessment of ICP 28 (anti-money laundering, combating the financing of terrorism) has been informed by the IMF’s assessment, also carried out in November 2008, of Jersey’s compliance with the Financial Action Task Force’s (FATF) anti-money laundering and combating the financing of terrorism (AML/CFT) standards, using the 2004 Methodology.

Institutional and market structure—overview

5. The insurance sector in Jersey is underdeveloped, in relation to banking and investment business on the island and to the insurance sectors in Guernsey and the Isle of Man. While the authorities have in the past sought to attract international insurance business (for example, captive insurers/managers and international life), other offshore centers developed their insurance sectors earlier and have achieved the critical mass and competitive position that Jersey lacks. A large number of insurers are licensed by the JFSC, but the majority undertakes business on a cross-border basis using brokers to access the market and with no physical presence in Jersey. Some of the companies established in the island are now closed to new business or are in the course of relocation. There are challenges for the JFSC in regulating the diverse remaining business in both an effective and proportionate manner.

6. The insurance business in Jersey is derived from three main sources: (i) local businesses and individuals seeking cover for their property, motor, and household risks, as well as life assurance and pensions; (ii) trust and company service providers based on the island seeking cover for a range of mostly international risks such as property portfolios abroad; and (iii) the limited international business which the island has attracted. The main domestic insurance risks are property related with the international business focus being catastrophe and weather risks. Insurers of domestic risks seek reinsurance to cover them for a percentage of catastrophe losses.

7. Other than the international business, most cover is obtained from insurers based overseas by the large insurance broker community on the island. There is no data for overall market size. Based on discussions with local firms and consideration of the JFSC’s data on brokerage income for general insurance business, the mission estimates that total annual general insurance premium flows may be around GBP 150 million.

8. The JFSC grants two types of permit under the Insurance Business (Jersey) Law 1996 (IB(J)L):

• Category A—firms incorporated overseas and licensed to sell business in Jersey. At end-September 2008 there were 172 such firms, of which 102 offered general insurance and 70 life. Only 3 firms have a physical presence on the island. Most Category A firms originate from the United Kingdom (UK) and other European Union (EU) jurisdictions, but there are also firms from South Africa and the United States of America (USA). The JFSC’s approach, both on licensing and subsequent supervision, relies heavily on the home state regulator. Although it requires Category A firms to submit annual accounts and copies of the home regulatory returns, these documents do not include data from these firms on business originating in Jersey.

• Category B—firms incorporated on the island. There are only 14 such firms, of which 3 (2 life and 1 general) are closed to new business (1 is in liquidation) and a further 3 have yet to write new business. The remainder writes mostly specialist risks. Net retained insurance risk (i.e., after reinsurance) is low and the net premium income in 2007 of the Category B firms was less than GBP 4 million. Total assets of Category B firms are around GBP 800 million.

9. The IB(J)L includes certain exemptions from the JFSC licensing, of which the most significant is the Jersey Mutual Insurance Society, which writes personal lines business for its members on a direct basis (i.e., without going through brokers). Gross premium income was GBP 3.6 million in 2007 (net premium income was around GBP 1 million). The insurer is not subject to any other regulatory authority. Insurance business carried on by the association of underwriters known as Lloyd’s is also exempt.

10. The JFSC also licenses intermediaries—around 120 for general insurance (of which around half are primary brokers, whose main business is insurance—as opposed to travel agents and others who sell insurance in connection with their principal line of business) and 98 for life insurance. All intermediaries are licensed and regulated under the Financial Services (Jersey) Law 1998 (FS(J)L) rather than the IB(J)L. General insurance broking has been licensed in Jersey since 2005.

11. The JFSC is the sole regulator of insurance in Jersey. However, for applications to carry on motor insurance business, additional authorization is required from the minister for transport and technical services under the motor traffic (Third Party Insurance) (Jersey) Law 1948. No company may be authorized unless it is a member of the Motor Insurers’ Bureau (MIB) in the UK. In practice, the minister will not grant such authorization without assurance from the JFSC that it is prepared to issue an insurance permit and that membership of the MIB is held by the applicant.

12. The JFSC is a statutory body corporate, established under Article 2 of the Financial Services Commission (Jersey) Law 1998 (FSC(J)L). It consists of a chairman and at least six other commissioners (currently nine), appointed by Jersey Parliament (the States) on the nomination of the minister for economic development. By convention, members of the States are not appointed commissioners. Under the FSC(J)L, the composition of the JFSC Commissioners has to secure a balance between the interests of providers of financial services, the users of such services, and the interests of the public. Although the minister may give guidance or general directions to the JFSC—under Article 12 of the FSC(J)L, in relation to the policies of the States—this can only be of a general nature. The minister and the JFSC have signed a memorandum of understanding (MOU) covering Article 12, but to date the minister has given no guidance or directions. The JFSC has a total of 108 staff.

13. There is no ombudsman (to adjudicate on customer complaints) and no policyholder compensation arrangements for insurance business on the island. However, the IB(J)L provides for schemes for compensating policyholders to be established if needed. (The government’s approach to consumer protection regulation and ombudsman services across all business on the island is under review and this may lead to changes in this area.)

14. Constitutionally, Jersey is a dependency of the Crown, owing allegiance to the Sovereign, but without incorporation into the UK. Jersey is self governing in internal matters. There are three main courts, the magistrate’s court, the royal court, and the court of appeal. Any appeals beyond the court of appeal are to the UK Privy Council. The island has its own legislative assembly (the States).

15. Jersey has its own companies legislation, but has no local accounting or actuarial standard setting bodies and it looks to other jurisdictions, especially the UK, for its framework of accounting, auditing, and actuarial standards:

• Broadly, the Companies (Jersey) Law 1991 (Companies Law) requires auditors of companies in Jersey to be members of a professional body in the UK or Ireland.

• Financial statements of insurance companies have to be prepared in accordance with International Financial Reporting Standards (IFRS) or the Generally Accepted Accounting Principles (GAAP) of the UK, the USA, or with the prior approval of the JFSC, “the country or territory in which the beneficial owner of the permit holder resides or is incorporated.”

• Life insurers have to appoint as actuary either a Fellow of the Institute of Actuaries in England and Wales or a Fellow of the Faculty of Actuaries in Scotland or someone who can satisfy the JFSC that he has “such actuarial qualifications and experience as are appropriate.” The JFSC considers the appropriateness of the actuarial standards adopted by insurers when assessing new permit applications and reviewing financial statements.

16. There is currently no official oversight of the quality of the audit work of Jersey companies, although auditors are subject to reviews by their relevant professional body such as the practice assurance review scheme operated by the Institute of Chartered Accountants in England and Wales. However, legislation to amend the Companies Law is being drafted that, in respect of companies that have securities that are admitted to trade on regulated markets, will (i) result in one or more professional bodies monitoring the quality of audit work; and (ii) enable action to be taken against auditors that breach rules designed to facilitate high quality audits.

Recent performance

17. Given the absence of data on the Jersey business of Category A permit holders and the limited business of Category B firms, it is not possible to assess the performance and profitability of Jersey insurance business. The mission did not undertake stress tests for the insurance sector. However, the mission was informed that general insurance business in Jersey is highly competitive and that there are limited indications as yet of a return to harder market conditions (i.e., scope for insurers to charge high premiums to reflect actual or expected increases in risk and/or changes in competitive conditions). All Category B firms maintain solvency cover well in excess of their minimum required margins.

18. The impact of the global credit and liquidity problems on Jersey insurers (Category B) has been limited, reflecting the nature and scale of their activities. There have been no significant losses. Impacts will be indirect, for example through reduced interest in the use of Jersey registered insurers by fund managers that wish to establish special purpose vehicles holding investment instruments and which have an insurance element.

Main findings

Table 1.

Summary of Observance of the Insurance Core Principles—Detailed Assessments

Table 1.

Summary of Observance of the Insurance Core Principles—Detailed Assessments

Insurance Core Principle	Grading	Comments
ICP1 - Conditions for effective insurance supervision	O	Jersey has well-defined, transparent and effective policy, legal and institutional frameworks for insurance business and access to well-functioning financial markets. The jurisdiction benefits from the availability of professional services locally and through access to the resources of major practices in the UK and elsewhere.
ICP2 - Supervisory objectives	O	The JFSC has clear and appropriate objectives (expressed as functions and guiding principles) and there is a clear distinction between regulation and promotion of the insurance sector.
ICP3 - Supervisory authority	LO	The JFSC has adequate powers and resources and is operationally independent. The need for government to make regulations and orders covering key aspects of the regulatory requirements could in certain circumstances constrain the JFSC’s ability to meet its regulatory objectives and could expose it to political influence. In practice, however, the JFSC enjoys a high degree of operational independence from government. Schedule 1 (FSC(J) L) should provide an explicit requirement that the reasons for the dismissal from office of any commissioner be made public.
ICP4 - Supervisory process	O	The JFSC conducts its functions in a transparent and accountable manner. Comprehensive information on its activities is provided to government, the States, and the public through various means. However, more information could be made available specifically on the insurance sector and regulatory activities for insurance.
ICP5–Supervisory cooperation and information sharing	O	The JFSC is committed to exchanging information with other supervisors, as evidenced by its readiness to become a signatory to the IAIS Multilateral MOU, and is doing so in practice in respect of both insurers and intermediaries. It is rightly focusing on developing its contacts with overseas regulatory agencies with the most importance to its market, particularly the UK.
ICP6–Licensing	PO	There is a comprehensive framework for the licensing of insurance business as defined by the IB(J)L. However, one general insurance business with significant domestic business is exempted from the licensing requirements in Jersey. While in licensing a foreign insurer (a Category A firm), the JFSC must satisfy itself that the regulatory framework in the home state is “adequate”, the JFSC has not developed an internal policy for making such an assessment (e.g., is equivalence considered). Category A insurers includes a small number of firms with physical presences in Jersey, i.e., branches. The JFSC should review its approach to these firms to implement regulation that reflects their branch status.
ICP7–Suitability of persons	O	The JFSC has a comprehensive framework for considering the suitability of key functionaries. The range of functionaries subject to these requirements is limited compared with some jurisdictions, but is adequate to enable the JFSC properly to assess the suitability of those persons with the main influence on compliance. The JFSC could consider whether it would find it useful to have an explicit provision preventing a person holding two positions in a company with potential for conflict of interest. It has adequate powers to identify and address such conflicts where they arise in practice.
ICP8–Changes in control and portfolio transfers	PO	The IB(J)L provides a framework for the regulation of changes in control and portfolio transfers. However, there is a gap in respect to changes of control—the IB(J)L does not place obligations directly on controllers to seek approval and shareholder controllers are not required to notify or seek approval for increases above predetermined control levels, even though in practice the requirements on firms to make notifications should enable the JFSC to identify and deal with most changes of control effectively.
ICP9–Corporate governance	O	The JFSC has developed a comprehensive set of requirements for corporate governance in its Codes of Practice for Insurance Business (Insurance Codes).
ICP10–Internal controls	O	The JFSC has developed a comprehensive set of requirements for internal controls in its Insurance Codes.
ICP11–Market analysis	O	The JFSC monitors the activities of licensed firms and wider market developments—taking into account the limited range of business conducted in Jersey.
ICP12–Reporting to supervisors and off-site monitoring	O	The JFSC has a well-developed process for analyzing annual returns and taking follow-up action. The JFSC by choice employs no qualified actuaries and the off-site work therefore relies on the UK Government Actuary’s Department (GAD) for the analysis of the most technical issues. This relationship, which has now been in place for a number of years, functions effectively. Supervisory staff takes responsibility for the communication and follow-up of issues at all stages of the process.
ICP13 - On-site inspection	LO	The JFSC has greatly increased on-site work in the last 18 months using a well-structured approach to on-site work that links visit frequency and scope to the firm’s risk rating and the wider supervisory program. The JFSC should develop the approach to include a thematic visit program—which may be most useful for intermediaries given the diverse nature of the insurance sector. It should also apply the model to branches, i.e., Category A firms with physical presences on the island.
ICP14 - Preventive and corrective measures	O	The JFSC’s approach is informed by its ability to communicate regularly with the small number of authorized insurance companies. This makes it easy to address concerns in the first instance through supervisory dialogue and discussion. However, the JFSC also has powers that it has used in practice to make more formal requirements of firms in the event of actual or expected concerns.
ICP15 - Enforcement or sanctions	O	The insurance regulatory framework includes extensive formal enforcement powers—many can be exercised directly by the JFSC, others require application to the Royal Court and the imposition of fines requires court proceedings. The JFSC rarely uses its powers in practice—reflecting the limited insurance business on the island and the results it has been able to achieve through preventive and corrective measures before a resort to formal action. The JFSC has taken enforcement action in other sectors under similar powers to those available for insurance business.
ICP16 - Winding-up or exit from the market	O	The framework clearly provides for appropriate routes for orderly exit and sets out the procedures for dealing with insolvency, including through transfer of policies to another insurer. The insolvency framework has not been tested in practice as no insurer has failed nor has the JFSC ever sought a winding up.
ICP17 - Group-wide supervision	NA	The JFSC currently has no responsibilities as group/home supervisor of any insurance group. Its current framework lacks key elements of the approach it would need were it to acquire such responsibilities, particularly a group solvency test. The JFSC should be able to adopt the necessary requirements and apply them via its directions and conditions powers, were the need to arise.
ICP18 - Risk assessment and management	LO	The JFSC has developed requirements for risk assessment and risk management in its Insurance Codes. The provisions applying to risk management are relatively limited and could be expanded, for example to set out the need for insurers to have a statement of risk appetite and to be able to assess, monitor and manage operational as well as other risks.
ICP19 - Insurance activity	O	The JFSC has adequate powers and procedures to require insurance companies to have the tools necessary to price business and manage their insurance risks effectively.
ICP20 - Liabilities	O	The JFSC has no framework of requirements for the establishment of adequate provisions and valuation of amounts recoverable under reinsurance. Instead, it requires firms to use international standards and normally those of the UK. Given the currently limited range of insurance business in the island—and limited insurance risks—such an approach is practical and efficient. In addition, the JFSC makes use of external actuarial support (GAD) to review the adequacy of individual firms’ provisions.
ICP21 - Investments	O	The JFSC has an adequate framework of requirements on insurers’ investments in the IB(J)L, Orders and Insurance Codes. To be fully effective, these requirements need to be enforced by adequate supervision and enforcement and through periodic exercises such as stress-testing and thematic visit programs. The JFSC should continue to monitor compliance with its requirements in the course of its on-site work in particular.
ICP22 - Derivatives and similar commitments	O	Given the limited scope of their insurance business, the use of derivatives by insurers in Jersey is low. The Insurance Codes include the key requirements for derivatives business. In practice, it adopts a tailored approach to the supervision of derivatives risks, allowing firms to use derivatives on a case by case basis. This is appropriate given the nature of the Jersey insurance sector.
ICP23 - Capital adequacy and solvency	LO	The JFSC has an appropriate framework of solvency regulations and processes to monitor solvency levels and to respond to breaches of minimum requirements. However, it should consider whether reliance on the EU Solvency I framework is appropriate. Many other jurisdictions have strengthened their requirements pending developments in international standards.
ICP24 - Intermediaries	O	The JFSC has a comprehensive framework for the regulation of insurance intermediaries. While the regulation is carried out under different laws and requirements from those applying to insurance companies, the JFSC has equivalent powers, including for enforcement of its requirements.
ICP25 - Consumer protection	O	The JFSC has a well-developed set of requirements on market conduct, applying to both insurers and intermediaries and, with the exception of Category A firms, assesses the issues in its supervisory work. While Jersey insurers are writing little new business, the JFSC could review its approach to consumer protection issues in firms closed to new business.
ICP26–Information, disclosure and transparency towards markets	NO	The JFSC has no requirements on disclosure by insurance companies of any of the information specified in this ICP. While for a number of Category B firms, such disclosure would have limited value or would be inappropriate given the nature of the business, some firms have significant numbers of policyholders and some are open to new business.
ICP27 - Fraud	O	The JFSC has a range of powers to require that insurance companies address fraud risks and it covers the issues in its risk assessment of firms and in its supervisory work. It should consider including in the Insurance Codes some requirements that address specifically the need for insurers to allocate resources and have effective procedures and controls to deter, detect, record, and report fraud.
ICP28 - Anti-money-laundering, combating the financing of terrorism	O	The JFSC has a well-developed set of requirements and includes AML issues in on-site supervision work. See also the IMF’s assessment, carried out in November 2008, of compliance with the FATF AML/CFT standards, using the 2004 Methodology.
Aggregate: Observed (O)–20, largely observed (LO)–4, partly observed (PO)–2, not observed (NO)–1, not applicable (N/A)–1.

View Table

Table 1.

Summary of Observance of the Insurance Core Principles—Detailed Assessments

Insurance Core Principle	Grading	Comments
ICP1 - Conditions for effective insurance supervision	O	Jersey has well-defined, transparent and effective policy, legal and institutional frameworks for insurance business and access to well-functioning financial markets. The jurisdiction benefits from the availability of professional services locally and through access to the resources of major practices in the UK and elsewhere.
ICP2 - Supervisory objectives	O	The JFSC has clear and appropriate objectives (expressed as functions and guiding principles) and there is a clear distinction between regulation and promotion of the insurance sector.
ICP3 - Supervisory authority	LO	The JFSC has adequate powers and resources and is operationally independent. The need for government to make regulations and orders covering key aspects of the regulatory requirements could in certain circumstances constrain the JFSC’s ability to meet its regulatory objectives and could expose it to political influence. In practice, however, the JFSC enjoys a high degree of operational independence from government. Schedule 1 (FSC(J) L) should provide an explicit requirement that the reasons for the dismissal from office of any commissioner be made public.
ICP4 - Supervisory process	O	The JFSC conducts its functions in a transparent and accountable manner. Comprehensive information on its activities is provided to government, the States, and the public through various means. However, more information could be made available specifically on the insurance sector and regulatory activities for insurance.
ICP5–Supervisory cooperation and information sharing	O	The JFSC is committed to exchanging information with other supervisors, as evidenced by its readiness to become a signatory to the IAIS Multilateral MOU, and is doing so in practice in respect of both insurers and intermediaries. It is rightly focusing on developing its contacts with overseas regulatory agencies with the most importance to its market, particularly the UK.
ICP6–Licensing	PO	There is a comprehensive framework for the licensing of insurance business as defined by the IB(J)L. However, one general insurance business with significant domestic business is exempted from the licensing requirements in Jersey. While in licensing a foreign insurer (a Category A firm), the JFSC must satisfy itself that the regulatory framework in the home state is “adequate”, the JFSC has not developed an internal policy for making such an assessment (e.g., is equivalence considered). Category A insurers includes a small number of firms with physical presences in Jersey, i.e., branches. The JFSC should review its approach to these firms to implement regulation that reflects their branch status.
ICP7–Suitability of persons	O	The JFSC has a comprehensive framework for considering the suitability of key functionaries. The range of functionaries subject to these requirements is limited compared with some jurisdictions, but is adequate to enable the JFSC properly to assess the suitability of those persons with the main influence on compliance. The JFSC could consider whether it would find it useful to have an explicit provision preventing a person holding two positions in a company with potential for conflict of interest. It has adequate powers to identify and address such conflicts where they arise in practice.
ICP8–Changes in control and portfolio transfers	PO	The IB(J)L provides a framework for the regulation of changes in control and portfolio transfers. However, there is a gap in respect to changes of control—the IB(J)L does not place obligations directly on controllers to seek approval and shareholder controllers are not required to notify or seek approval for increases above predetermined control levels, even though in practice the requirements on firms to make notifications should enable the JFSC to identify and deal with most changes of control effectively.
ICP9–Corporate governance	O	The JFSC has developed a comprehensive set of requirements for corporate governance in its Codes of Practice for Insurance Business (Insurance Codes).
ICP10–Internal controls	O	The JFSC has developed a comprehensive set of requirements for internal controls in its Insurance Codes.
ICP11–Market analysis	O	The JFSC monitors the activities of licensed firms and wider market developments—taking into account the limited range of business conducted in Jersey.
ICP12–Reporting to supervisors and off-site monitoring	O	The JFSC has a well-developed process for analyzing annual returns and taking follow-up action. The JFSC by choice employs no qualified actuaries and the off-site work therefore relies on the UK Government Actuary’s Department (GAD) for the analysis of the most technical issues. This relationship, which has now been in place for a number of years, functions effectively. Supervisory staff takes responsibility for the communication and follow-up of issues at all stages of the process.
ICP13 - On-site inspection	LO	The JFSC has greatly increased on-site work in the last 18 months using a well-structured approach to on-site work that links visit frequency and scope to the firm’s risk rating and the wider supervisory program. The JFSC should develop the approach to include a thematic visit program—which may be most useful for intermediaries given the diverse nature of the insurance sector. It should also apply the model to branches, i.e., Category A firms with physical presences on the island.
ICP14 - Preventive and corrective measures	O	The JFSC’s approach is informed by its ability to communicate regularly with the small number of authorized insurance companies. This makes it easy to address concerns in the first instance through supervisory dialogue and discussion. However, the JFSC also has powers that it has used in practice to make more formal requirements of firms in the event of actual or expected concerns.
ICP15 - Enforcement or sanctions	O	The insurance regulatory framework includes extensive formal enforcement powers—many can be exercised directly by the JFSC, others require application to the Royal Court and the imposition of fines requires court proceedings. The JFSC rarely uses its powers in practice—reflecting the limited insurance business on the island and the results it has been able to achieve through preventive and corrective measures before a resort to formal action. The JFSC has taken enforcement action in other sectors under similar powers to those available for insurance business.
ICP16 - Winding-up or exit from the market	O	The framework clearly provides for appropriate routes for orderly exit and sets out the procedures for dealing with insolvency, including through transfer of policies to another insurer. The insolvency framework has not been tested in practice as no insurer has failed nor has the JFSC ever sought a winding up.
ICP17 - Group-wide supervision	NA	The JFSC currently has no responsibilities as group/home supervisor of any insurance group. Its current framework lacks key elements of the approach it would need were it to acquire such responsibilities, particularly a group solvency test. The JFSC should be able to adopt the necessary requirements and apply them via its directions and conditions powers, were the need to arise.
ICP18 - Risk assessment and management	LO	The JFSC has developed requirements for risk assessment and risk management in its Insurance Codes. The provisions applying to risk management are relatively limited and could be expanded, for example to set out the need for insurers to have a statement of risk appetite and to be able to assess, monitor and manage operational as well as other risks.
ICP19 - Insurance activity	O	The JFSC has adequate powers and procedures to require insurance companies to have the tools necessary to price business and manage their insurance risks effectively.
ICP20 - Liabilities	O	The JFSC has no framework of requirements for the establishment of adequate provisions and valuation of amounts recoverable under reinsurance. Instead, it requires firms to use international standards and normally those of the UK. Given the currently limited range of insurance business in the island—and limited insurance risks—such an approach is practical and efficient. In addition, the JFSC makes use of external actuarial support (GAD) to review the adequacy of individual firms’ provisions.
ICP21 - Investments	O	The JFSC has an adequate framework of requirements on insurers’ investments in the IB(J)L, Orders and Insurance Codes. To be fully effective, these requirements need to be enforced by adequate supervision and enforcement and through periodic exercises such as stress-testing and thematic visit programs. The JFSC should continue to monitor compliance with its requirements in the course of its on-site work in particular.
ICP22 - Derivatives and similar commitments	O	Given the limited scope of their insurance business, the use of derivatives by insurers in Jersey is low. The Insurance Codes include the key requirements for derivatives business. In practice, it adopts a tailored approach to the supervision of derivatives risks, allowing firms to use derivatives on a case by case basis. This is appropriate given the nature of the Jersey insurance sector.
ICP23 - Capital adequacy and solvency	LO	The JFSC has an appropriate framework of solvency regulations and processes to monitor solvency levels and to respond to breaches of minimum requirements. However, it should consider whether reliance on the EU Solvency I framework is appropriate. Many other jurisdictions have strengthened their requirements pending developments in international standards.
ICP24 - Intermediaries	O	The JFSC has a comprehensive framework for the regulation of insurance intermediaries. While the regulation is carried out under different laws and requirements from those applying to insurance companies, the JFSC has equivalent powers, including for enforcement of its requirements.
ICP25 - Consumer protection	O	The JFSC has a well-developed set of requirements on market conduct, applying to both insurers and intermediaries and, with the exception of Category A firms, assesses the issues in its supervisory work. While Jersey insurers are writing little new business, the JFSC could review its approach to consumer protection issues in firms closed to new business.
ICP26–Information, disclosure and transparency towards markets	NO	The JFSC has no requirements on disclosure by insurance companies of any of the information specified in this ICP. While for a number of Category B firms, such disclosure would have limited value or would be inappropriate given the nature of the business, some firms have significant numbers of policyholders and some are open to new business.
ICP27 - Fraud	O	The JFSC has a range of powers to require that insurance companies address fraud risks and it covers the issues in its risk assessment of firms and in its supervisory work. It should consider including in the Insurance Codes some requirements that address specifically the need for insurers to allocate resources and have effective procedures and controls to deter, detect, record, and report fraud.
ICP28 - Anti-money-laundering, combating the financing of terrorism	O	The JFSC has a well-developed set of requirements and includes AML issues in on-site supervision work. See also the IMF’s assessment, carried out in November 2008, of compliance with the FATF AML/CFT standards, using the 2004 Methodology.
Aggregate: Observed (O)–20, largely observed (LO)–4, partly observed (PO)–2, not observed (NO)–1, not applicable (N/A)–1.

Recommended action plan and authorities’ response

Recommended action plan

Table 2.

Recommended Action Plan to Improve Observance of the Insurance Core Principles

Table 2.

Recommended Action Plan to Improve Observance of the Insurance Core Principles

Principle	Recommended Action
ICP3 - Supervisory authority	Schedule 1 of the FSC(J) L should be amended to provide an explicit requirement that the reasons for the dismissal from office of any commissioner be made public.
ICP6 - Licensing	The scope of exemptions from the IB(J)L needs to be narrowed so that all insurers are required to be licensed and are subject to JFSC supervision. The JFSC should develop an internal policy on the assessment of whether regulation by the home state regulators of Category A firms is equivalent to that of the JFSC. The JFSC should review its approach to the regulation of Category A firms with a presence on the island—these should be regulated as branches.
ICP8–Changes in control and portfolio transfers	The IB(J)L should be amended to require potential shareholder controllers of insurance companies to seek the JFSC’s consent at the appropriate levels of control.
ICP13 - On-site inspection	The JFSC should apply its risk model to branches, i.e., Category A firms with physical presences on the island—and undertake on-site work as justified by its assessment of the risks. It should introduce a thematic (cross-firm) approach to its supervisory work.
ICP17 - Group-wide supervision	The JFSC should review whether, in the event that it were ever to take on group/home supervisory responsibilities, it would have adequate powers and policies. Opportunities to amend the legislation could be taken, for example to give the JFSC powers to obtain information from unregulated entities within a group.
ICP 18–Risk assessment and management	The JFSC should develop further requirements on risk management, for example setting out the need for insurers to have a statement of risk appetite and to be able to assess, monitor and manage operational risk.
ICP 23 - Capital adequacy and solvency	The JFSC should continue to monitor the development of international standards for risk based solvency. Pending the introduction of these new standards the JFSC should review its existing solvency requirements and, where appropriate, introduce revised standards or set individual minimum requirements based on the risk assessment of each firm.
ICP26 - Disclosure and Transparency	The JFSC should work with insurers to develop disclosure requirements, taking into account the nature of insurance business conducted by firms incorporated on the island, and taking a view on which insurers to apply them to—e.g., whether they should apply to the small number of Category A insurers with physical presence on the island. The JFSC could also consider publishing all or part of supervisory returns itself.

View Table

Table 2.

Recommended Action Plan to Improve Observance of the Insurance Core Principles

Principle	Recommended Action
ICP3 - Supervisory authority	Schedule 1 of the FSC(J) L should be amended to provide an explicit requirement that the reasons for the dismissal from office of any commissioner be made public.
ICP6 - Licensing	The scope of exemptions from the IB(J)L needs to be narrowed so that all insurers are required to be licensed and are subject to JFSC supervision. The JFSC should develop an internal policy on the assessment of whether regulation by the home state regulators of Category A firms is equivalent to that of the JFSC. The JFSC should review its approach to the regulation of Category A firms with a presence on the island—these should be regulated as branches.
ICP8–Changes in control and portfolio transfers	The IB(J)L should be amended to require potential shareholder controllers of insurance companies to seek the JFSC’s consent at the appropriate levels of control.
ICP13 - On-site inspection	The JFSC should apply its risk model to branches, i.e., Category A firms with physical presences on the island—and undertake on-site work as justified by its assessment of the risks. It should introduce a thematic (cross-firm) approach to its supervisory work.
ICP17 - Group-wide supervision	The JFSC should review whether, in the event that it were ever to take on group/home supervisory responsibilities, it would have adequate powers and policies. Opportunities to amend the legislation could be taken, for example to give the JFSC powers to obtain information from unregulated entities within a group.
ICP 18–Risk assessment and management	The JFSC should develop further requirements on risk management, for example setting out the need for insurers to have a statement of risk appetite and to be able to assess, monitor and manage operational risk.
ICP 23 - Capital adequacy and solvency	The JFSC should continue to monitor the development of international standards for risk based solvency. Pending the introduction of these new standards the JFSC should review its existing solvency requirements and, where appropriate, introduce revised standards or set individual minimum requirements based on the risk assessment of each firm.
ICP26 - Disclosure and Transparency	The JFSC should work with insurers to develop disclosure requirements, taking into account the nature of insurance business conducted by firms incorporated on the island, and taking a view on which insurers to apply them to—e.g., whether they should apply to the small number of Category A insurers with physical presence on the island. The JFSC could also consider publishing all or part of supervisory returns itself.