Insurance – A hidden jewel
Jersey is less well-known in insurance circles than neighbouring Guernsey, notably for expertise in captive management and as an offshore domicile for international insurers. However, a fairer approach would recognise the strengths of the existing insurance industry in Jersey and its scope to develop and offer benefits similar to those just across the water. Indeed, Jersey Finance is on public record as making the development of insurance a priority for Jersey in 2010.
Business-friendly: Jersey’s financial services environment is well-adapted to the provision of insurance services. The small but active insurance community includes local insurers alongside major UK and international insurers, with subsidiaries, branches or other representation, providing coverage to policyholders in Jersey. A leading Lloyd’s syndicate has established its holding company in Jersey. Insurance is placed directly or via local brokers, coverholders and insurance managers. There is a well-developed supporting cast of professional service providers, including lawyers and accountants.
Tax: Jersey’s prized position on the OECD "White List" is common knowledge. The 0/10 tax regime, whilst under attack from overseas, is not so dissimilar from the regime in, for example, Dublin, another well-known insurance centre. The tax debate should be about the whole tax environment and not just particular features that are attacked as allegedly anti-competitive, unfair advantages.
Regulatory: the Jersey Financial Services Commission is a member of the International Association of Insurance Supervisors and the effectiveness of the regulatory environment is widely recognised. Jersey’s acknowledged success and world-class reputation for financial services have fostered the development of the strong and resourceful service community mentioned above. The lack of the European Union passport for (re)insurance is a disadvantage but this would not affect Lloyd’s with its worldwide licence and existing exemption in Jersey, so that little more would need to be done by a Lloyd’s syndicate to establish a presence here. Branch networks can be readily established and reinsurance mechanisms effectively deployed, by insurance groups.
Jersey law: this is based principally upon local custom and case law and legislation passed by the States of Jersey. The influence of English law is strong, particularly in relation to companies and insurance. Some changes (for example, regarding the classifications of insurance intermediary) are needed but the essential elements are in place, including second generation Protected Cell Company and new Incorporated Cell Company structures.
Practical matters: insurance is quite literally part and parcel of daily life and an element of the fabric of a developed society. It is there for when the unforeseen or accidental happens or something goes wrong. Indeed, that value is often hidden from view or not fully appreciated until long after the purchase of the policy. Many everyday activities could not take place unless the safety net of insurance were present, in the background, courtesy of stable and financially strong providers, who will be around for years to come. Set against that is the sad reality of a "blame" and litigation culture, which causes people to make claims they would never have dreamed of not many years ago.
Insurers have largely met bill for the waves of asbestos-related claims and claims against the tobacco and pharmaceutical industries. Events in Haiti, the tsunami in Indonesia and Hurricane Katrina in the Gulf of Mexico highlight the ever-present risk of natural disasters such as earthquakes and hurricanes. Insurers have provided cover for such catastrophic losses for many years, as well as for man-made catastrophes like the Piper Alpha or the BP Texas Oil Refinery explosions or maritime disasters like the Exxon Valdez or closer to home the Erica, and even the Torrey Canyon in 1967. The largest insurers themselves rely upon international reinsurance to spread the burden of accepting such enormous risks.
The average consumer will typically buy motor and household insurance and often travel and private medical insurance. Employers need to cater for workplace issues, including health and safety. Shops, banks, restaurants and pubs, schools and public buildings and places all need insurance against liability to members of the public. Businesses need to protect their staff and officers in relation to their daily business activities. Trustees and other professionals active in financial services will want more than just contractual or statutory indemnities.
Technical matters: an insurance policy is a special type of contract and its differences from general contract can sometimes be quite unexpected in effect. "Caveat emptor" in general contract translates into "uberrima fides" in insurance, a much more onerous disclosure obligation, requiring due mention to insurers of all facts and circumstances material to the risk to be covered. Failure to disclose entitles the insurers to avoid cover from the start. Policies usually impose strict conditions regarding prompt notification of losses, occurrences, claims and circumstances and as regards the conduct of the insured after making a claim. Moreover, unlike in general contract, warranties in insurance are the most important terms. The remedy in English law for breach of a warranty, however innocent and even if unrelated to the damage suffered, is severe: cover is removed immediately for all claims post-breach. This outcome contrasts with the position in many other (civil) jurisdictions and reform is under consideration.
Given such special, technical features and the scope for disagreement, there is a need for specialist professional legal advice and assistance, much as in other areas of commerce and business. An early, focussed approach to resolution can yield significant dividends and savings in the longer run. Indeed, it can facilitate settlement before the legal and associated costs, including loss of management time, become so great as to be a matter of contention in their own right.
Conclusion: insurance is an indispensable and effective tool for coping with issues at the heart of daily personal and business life. Jersey is an excellent place from which to conduct insurance (and reinsurance) business and the specialist help is available both to those who wish to unlock its benefits and to coverage providers, who want to ensure claims are properly dealt with.
[The writer is an employed English solicitor with Viberts in Jersey, specialising in insurance and reinsurance legal matters, both contentious and non-contentious.]