Consultation on proposal to increase insurance fees No 8 2022

The Jersey Financial Services Commission (JFSC) invites comments on this consultation. Comments should reach Jersey Finance Limited by 25 September 2022.

Responses should be sent to:

Lisa Springate

Jersey Finance Limited
4th Floor
Sir Walter Raleigh House
48-50 Esplanade
St Helier
Jersey
JE2 3QB

Direct Line:  +44 (0) 1534 836029
Office Line:  +44 (0) 1534 836000
Email: [email protected]

Alternatively, responses may be sent directly to us by 25 September 2022. If you require any assistance, clarification or wish to discuss any aspect of the proposal prior to formulating a response, please contact us.

JFSC Finance Team

Jersey Financial Services Commission
PO Box 267
14-18 Castle Street
St Helier
Jersey
JE4 8TP

Telephone:  +44 (0) 1534 822000
Email:  [email protected]

It is our policy to provide the content of responses for inspection unless specifically requested otherwise.

It is the policy of Jersey Finance Limited (unless otherwise requested or agreed) to collate all responses and share them verbatim with us on an anonymised basis (with reference made only to the type of respondent, e.g. individual, law firm, trust company etc.) This collated, anonymised response will, typically, be placed in JFL’s permanent electronic archive which is currently open to all JFL members.

Glossary

Commission Law	Financial Services Commission (Jersey) Law 1998, as amended
JFL	Jersey Finance Limited
JFSC	Jersey Financial Services Commission

1   Consultation

1.1   Basis for consultation

1.1.1 We are issuing this consultation in accordance with Article 8(3) of the Commission Law, under which we “may, in connection with the carrying out of its functions […] consult and seek the advice of such persons or bodies whether inside or outside Jersey as it considers appropriate”.

1.1.2 In addition, Article 15(3) of the Commission Law requires that before we introduce and publish any fee:

“[T]he Commission must first publish a report that must include

(a)details of the duty or power for or in respect of which the fee is to be determined

(b)details of the proposed fee

(ba)details of the extent (if any) to which any penalties received have reduced the level of fee that would otherwise have been proposed

(c)a request for comments on the level of the proposed fee

(d)a date, that is at least 28 days after the publication of the report, before which those comments may be made to the Commission”.

1.1.3 Article 15(4) of the Commission Law provides that should the JFSC and a Representative Body be unable to agree a fee that the JFSC must request the Bailiff to appoint three Jurats to consider if the fee proposed is unreasonable.

1.1.4 We consider that the proposed fee rates are reasonable and that this consultation  constitutes such a report as required by the Commission Law.

1.2   Who will be affected by the proposed changes?

1.2.1 These fee amendments will affect any person applying for, or already holding a permit to undertake insurance business.

1.3   Responding to the consultation

1.3.1 We invite comments, in writing, from interested parties on the content of this consultation.

1.3.2 Comments should be shared with either Jersey Finance Limited or us by 25 September 2022.

1.4   Next steps

Following this consultation, we will publish feedback and the final fees notices in September. Fees will be administered via businesses’ myJFSC portal accounts. Businesses will receive an email prompt to notify them that an invoice is awaiting payment.

2   The JFSC

2.1   Overview

2.1.1 We are a statutory body corporate established under the Commission Law.  We are responsible for the supervision and development of financial services provided in or from within Jersey.

2.1.2 Article 15(2) of the Commission Law provides that fees set by the JFSC are to be retained and must, together with any other income:

2.1.2.1 raise sufficient income to meet our liabilities

2.1.2.2 cover our expenses

2.1.2.3 provide a reserve for such amount as we consider necessary.

2.2   The JFSC’s functions

2.2.1 Article 5 of the Commission Law prescribes that we are responsible for:

2.2.1.1 the supervision and development of financial services provided in or from within Jersey

2.2.1.2 providing the States of Jersey, any minister or any other public body with reports, advice, assistance and information in relation to any matter connected with financial services

2.2.1.3 preparing and submitting to the minister recommendations for the introduction, amendment or replacement of legislation appertaining to financial services, companies and other forms of business structure

2.2.1.4 such functions in relation to financial services or such incidental or ancillary matters:

• as are required or authorised by or under any enactment, or
• as the States may, by Regulations, transfer; and

2.2.1.5 such other functions as are conferred on the JFSC by any other Law or enactment.

2.3   Guiding principles

2.3.1 Article 7 of the Commission Law provides that in exercising our functions, we may take into account any appropriate matter, but that we should consider:

2.3.1.1 the reduction of the risk to the public of financial loss due to dishonesty, incompetence or malpractice by, or the financial unsoundness of, persons carrying on the business of financial services in or from within Jersey

2.3.1.2 the protection and enhancement of the reputation and integrity of Jersey in commercial and financial matters

2.3.1.3 the best economic interests of Jersey

2.3.1.4 the need to counter financial crime in both Jersey and elsewhere

3   Proposals

3.1   Funding requirement

3.1.1 In order for us to obtain sufficient funding to carry out our supervisory objectives and to ensure our ongoing financial resilience, we need to raise £1.134m in fees from the insurance sector in 2022.

3.2   Regulatory fee proposals

3.2.1 The Commission Law contemplates increases to fees in line with RPI, which was recorded as 7.9% in June 2022. Although the cost of regulation continues to rise well in excess of this metric, our ongoing focus on cost control means that the inflationary component of the proposed fee increase can be limited to this amount.

3.2.2 An additional fee rate increase of 5% is dedicated to the stabalisation of our Financial Resilience as detailed in the Business Plan and Financial Resilience Review published earlier this year.

3.2.3 The combined effect of the above is that we propose a fee rate increase of 12.9% for 2022/23, comprising:

3.2.3.1 Jersey RPI of 7.9%

3.2.3.2 a contribution towards our financial resilience objectives of 5%.

3.2.4 No Civil Financial Penalties have been levied on entities in the insurance sector, which would be applied to reduce these fees.

3.2.5 Draft fees notices reflecting the proposals can be found in Appendix B.

3.2.6 Question:  Do you agree with the proposed fee increase of 12.9%?

3.3   Supervisory effort and cost reduction

3.3.1 We are closely monitoring and managing our costs and have carefully managed costs for our insurance sector supervision activities in recent years.

3.3.2 An important impact of our investment programmes over the last few year has been the focus on operational effectiveness & increased efficiency, both in the handling of data through our customer platforms and in the efficiency of our supervisory staff. One of the key benefits has been the ability to our limited cost increase, and further contribute to achieving value for money.

Appendix A - List of bodies who have been sent this consultation

• Jersey Finance Limited
• Chartered Insurance Institute

Appendix B - Draft Insurance Business Fees Notice

	Notice of Fees
Published in accordance with:	Article 15 of the Financial Services Commission (Jersey) Law 1998, as amended
Payable by or in relation to:	Insurance Business
Pursuant to:	Articles 6(1) and 43D of the Insurance Business (Jersey) Law 1996, as amended
Commencement date:	The fees set out in this notice are effective 1 October 2022

1 Interpretation

1.1   In this notice, unless the context otherwise requires:

cell and cell company	have the meanings assigned to them by the Companies Law
Companies Law	means the Companies (Jersey) Law 1991, as amended
JFSC	means the Jersey Financial Services Commission
Law	means the Insurance Business (Jersey) Law 1996, as amended
limited company	has the meaning assigned to it by the Companies Law
limited liability partnership	has the meaning assigned to it by the Limited Liability Partnerships (Jersey) Law 1997
permit holder	has the meaning assigned to it by the Law
transfer of insurance business	means a scheme for the transfer of insurance business as required by Article 27 of and Schedule 2 to the Law

2   Application fee

2.1   The fee to accompany an application for a permit to carry on insurance business under the Law shall be the amount set out in Schedule 1.

3   Annual fee

3.1   A permit holder shall pay an annual fee in accordance with the amount set out in Schedule 2.

3.2   The annual fee is payable by permit holders on 1 October of each year.

3.3   The due date for the annual fee is 31 October in the same year.

4   Registration change fee

4.1   A fee of £2,460 is payable in relation to category B permits where:

a) an insurance company that is registered under the Companies Law as a limited company changes that registration to registration as a cell company or a cell

b)   a partnership carrying on insurance business as a limited liability partnership changes that registration to registration as a cell company or a cell.

4.2   A registration change fee paid under paragraph 4.1 shall be taken to include the fee payable by the first cell of that cell company for an application for a category B permit where the insurance business to be written in that first cell is the insurance business that was, prior to the change in registration to a cell compay, written by the insurance company or partnership referred to in paragraph 4.1.

4.3   Where the fee specified in paragraph 4.1 has been paid, paragraph 3.1 shall apply to the annual fee due next following the grant of the permit (and for each subsequent annual fee due) for that cell company and for that cell.

4.4   A fee of £2,340 is payable in relation to a category B permit where a cell company or a cell that is registered as such under the Companies Law changes that registration to registration as a:

a) limited company

b)   limited liability partnership.

Where such a fee is paid, paragraph 3.1 shall apply to the next annual fee due following the grant of the permit and each subsequent annual fee due for the limited company or the limited liability partnership.

5   Transfer of insurance business

5.1   A fee of £9,870 is payable where a permit holder plans to undergo a Transfer of Insurance Business (‘transfer’). This fee is payable to us at the time of submission of draft documentation relating to the transfer, in advance of the associated Direction Hearing.

6   Late payment of fees

6.1   If the annual fee is not received by us by the due date, an additional late payment fee of 5% of the unpaid principal amount will be applied on the day after the due date, and on the first day of each following calendar month.

7   Late filing fees

7.1   If a permit holder fails to file or deliver any document to us under the provisions of the Law or under the provisions of any Order issued in accordance with the Law, on or before the date that the document becomes due, the permit holder shall be liable to pay a fee of £100 for each complete month or part thereof that the document remains unfiled or undelivered unless the permit holder has given us prior written notice of the reasons for the late filing, or delivery of a document, and we have agreed in writing that the filing may be late.  Any such later agreed date shall become the due date for the purposes of the calculation and the payment of late filing fees.

Schedule 1 – application fees

Category of permit	Application fee
Category A	i)   £9,870 if the permit applied for is to include long-term business of any class; or ii)   £4,930 in any other case.
Category B (where the applicant is not a cell company or a cell)	i)   £17,240 if the permit applied for is to include long-term business of any class; or ii)   £8,610 in any other case.
Category B (where the applicant is a cell company or a cell)	iii)   £8,610 if the permit applied for is to be granted to a cell company; iv) £4,930 if the permit applied for is to be granted to a cell and is to include long-term business of any class; or v)   £2,460 if the permit applied for is to be granted to a cell and is to include general business of any class.

Schedule 2 – annual fees

Category of permit	Application fee
Category A	vi) £9,870 if the permit includes long-term business of any class; or vii) £4,930 in any other case.
Category B (where the applicant is not a cell company or a cell)	viii) £17,240 if the permit includes long-term business of any class; or ix) £8,610 in any other case.
Category B (where the applicant is a cell company or a cell)	x)   £8,610 if the permit is held by a cell company; xi) £4,930 if the permit is held by a cell and includes long-term business of any class; or xii) £2,460 if the permit is held by a cell and includes general business of any class.