Jersey Mutual Insurance Society Incorporated: alteration of fundamental rules – petition.

STATES OF JERSEY

JERSEY MUTUAL INSURANCE SOCIETY INCORPORATED: ALTERATION OF FUNDAMENTAL RULES – PETITION

Lodged au Greffe on 10th September 2013 by Deputy J.A.N. Le Fondré of St. Lawrence

STATES GREFFE

2013   Price code: C  P.108

PROPOSITION

THE STATES are asked to decide whether they are of opinion

to grant the prayer of the petition presented on behalf of the Jersey Mutual Insurance Society Incorporated (the "Society") that legal effect be given to the amendment and substitution of the Fundamental Rules of the Society as set out in the petition.

DEPUTY J.A.N. LE FONDRÉ OF ST. LAWRENCE

REPORT

The  Society –  then  known  as  the  Jersey  Mutual  Fire  Insurance  Society –  was incorporated by Act of the States passed on the 13th day of February 1908. At this time, legal effect was given to the Fundamental Rules of the Society (the "Rules"), which continue to be embodied by statute. The Society is Jersey's only insurance society,  operates  solely  in  Jersey  and  is  Jersey's  main  provider  of  household insurance.

At the Annual General Meeting of the Society held on 7th December 2012, it was resolved  by  special  resolution  of  the  members  of  the  Society  that  the  Rules  be amended and substituted in their entirety. To give legal effect to the amendment and substitution of the Rules, the Society has prepared a Humble Petition to the States requesting them to do so.

There are numerous changes being sought, all of which are aimed at updating and modernising the Rules, in particular in light of the commencement of regulation of the Society by the Jersey Financial Services Commission.

Summary of Key Changes

• Amendment to call on the members

Currently, in the unlikely event that the Society becomes liable for claims which are not covered under reinsurance policies and which cannot be paid from the capital of the Society, the Society can have recourse to its members to  make  up  the  insufficiency.  The  amendments  to  the  Rules  limit  the maximum  liability  of  members  in  this  regard  to  £5.  This  amendment  is intended to promote fairness to the members and to reflect market practice.

• Increased reference to the Bye-Laws

The Rules currently refer to the Society's Bye-Laws adopted by the members in a general meeting (the "Bye-Laws"), which are for instance referred to in the context of the composition and duties of the Supervisory Committee. The Revised Rules have incorporated a number of further references to the Bye- Laws, for instance in Rule 2 of the Revised Rules, which states that provisions in respect of the Board of Administration will be set out in the Bye-Laws. The advantage of increasing the use of the Bye-Laws is that changes can be made to  the  Bye-Laws,  for  example  to  amend  administrative  procedures,  by approval of the members, without the need for legislation adopted by the States of Jersey.

• Amendments intended to decrease requirement for further revisions in the future

A number of the Rules have been amended with the intention of decreasing the likelihood of this process having to be repeated in the near future. Key amendments in this regard, in Rule 1, make the Rules subject to the Society's legal and regulatory obligations. This amendment is intended to ensure that the Society is not placed in the difficult situation where its legal or regulatory obligations are inconsistent with the provisions of the Rules. Amendments of

this  nature  also  include  inserting  flexibility  in  how:  (i) minutes  are  kept (Rule 6);  (ii) financial  transactions  are  carried  out  and  recorded  (Rules 7 and 20); and (iii) notices are given and received (Rules 22, 23, and 29). These amendments are intended to allow for developments in the future (for instance if cheques cease to be a valid manner of making payments, and are replaced by another form of transfer not currently in use).

• Removal of References to the Judicial Greffier

The Rules currently provide that certain filings will be made with the Judicial Greffier (for instance in Rule 22). It has been agreed, in consultation with the Judicial  Greffier,  that  these  filings  will  no  longer  be  required  when  the Commission commences its regulation of the Society.

• Investment of Capital made by the Society

In  the  current  Rules,  Rule 27  stipulates  the  type  of  investments  that  the Society can make with its capital. These restrictions have been deleted in the Revised  Rules  as  it  is  the  expectation  of  the  Society  that  in  the  future investments will have to be made in accordance with the rules and regulations put in place by the Commission.

• Other amendments for consistency of terminology and to promote flexibility

A number of other amendments have been made to the Rules, which are designed to make the use of terminology in the Rules more consistent, and to promote flexibility.

Financial and manpower implications

There are no financial or manpower implications for the States arising from this proposition, other than the costs involved in the drafting of the necessary amendments to the legislation relating to the Society. As mentioned, part of the rationale behind many of the changes is to defer and minimise the need for similar such legislation in the future.

APPENDIX

(hazardous)  which  exceeds  the  Society's  threshold  in  respect  of  Class II (hazardous) risks. The thresholds referred to in this paragraph  shall  be  as  determined  from  time  to  time  by  the  Board  of  Administration.  

Such  reinsurance  shall  be  effected  with  insurance  companies  or  underwriters  from  time  to  time  approved  by  the  Board  of  Administration,  on  such  terms  and  conditions  as  the  Board  of  Administration may from time to time determine.  

The Society may accept and be paid commissions and agency fees on  such insurance business as the Society being itself unable to conduct  may introduce to other insurers.  

The Society may carry on such other activities as are or may be  considered to be ancillary to the primary business of the Society or the  promotion  thereof  as  the  Board  of  Administration  may  determine  from time to time.  

The Society may carry on any social or benevolent activity, including  the  making  of  donations,  the  raising  of  funds,  the  giving  of  sponsorship  or  any  other  activity  carried  on  for  a  charitable  or  benevolent purpose.  

The Society shall comply with all legal and regulatory requirements to  which it is subject from time to time arising as a result of the conduct  of its activities. In the event of any conflict between this clause and  any other provision of these Rules, this clause will prevail.  

The  Board  of  Administration  may  from  time  to  time  adopt  such  policies and procedures as it shall see fit to comply with all such legal  and regulatory requirements.  

2. A Board of Administration shall be formed, composed of a number of  Directors determined in accordance with the Society's Bye-Laws, all  of whom shall be selected from among the members of the Society at  a General Meeting of the said members. The Board of Administration  shall name annually three of their number as President, Vice-President  and Junior Vice-President for the current year (who will be known as  the Supervisory Committee, the powers duties of which will be laid  down in the Society's Bye-Laws); they shall have full power to direct,  conduct and manage the affairs of the Society in conformity with  these Rules and the Bye-Laws made and to be made from time to time  for the  government  of  the  Society.  Each  Director  shall  remain  in  office for a term determined in accordance with the Society's Bye- Laws. Should a Director of the Board of Administration die, resign,  become incapacitated, be removed from office in accordance with the  procedure set out in the Society's Bye-Laws or otherwise cease to be a  member  of  the  Society,  during  his  term  of  office,  the  Board  of  Administration may appoint a substitute who shall remain in office  until the 25th day of December next following. At the next Annual  General Meeting, a Director shall be named to fill the vacancy thus  

caused until the end of his predecessor's unexpired term. The rules  and procedures relating to Directors retiring by rotation shall be set  out in the Society's Bye-Laws, which shall also state any period for  which retiring Directors are not eligible for re-election.  

3. All Bye-Laws for giving effect to these Rules shall be adopted either  at the Annual General Meeting of the Society or at a Special General  Meeting convened under Rule 23.  
4. Five of the Directors duly assembled shall form a quorum and the  Board of Administration shall assemble as often as may be necessary  for conducting the business of the Society.  

In the event that a quorum fails to exist on or during the appointed  time set, those present shall adjourn the meeting to a new date and  time within the following 7 days.  

5. The Board of Administration shall appoint a General Manager and  such  other  officers  as  it  may  deem  necessary  for  the  proper  management  of  the  Society's  affairs  at  such  remuneration  as  the  Board shall think proper. The Board of Administration shall also have  power to dismiss any officer for incapacity, negligence, disobedience,  misconduct  or  such  other  reason  as  they  may  determine,  and  to  replace him. The Board of Administration shall have the right to set  up a pension scheme or pension schemes for the purpose of providing  for pensions for such employees of the Society as may be selected  from time to time.  

The Directors of the Board of Administration shall receive an annual  remuneration  for  their  services,  the  amount  of  which  shall  be  determined and voted at the Annual General Meeting of the Society.  

6. The  General  Manager,  or  his  duly  authorised  substitute,  shall  be present at all the meetings of the Board of Administration and at the General Meetings; he shall correctly record the names of the Directors present as well as the minutes of the deliberations (either in a book provided for the purpose or by such other means as is agreed by the Board of Administration from time to time), and such minutes shall be signed by the Director who presides over the subsequent meeting. The General Manager shall keep the accounts and have the custody of the documents  of  the  Society  under  the  direction  of  the  Board  of Administration;  he,  or  a  duly  authorised  officer,  shall  receive  all monies due to the Society and shall sign the necessary receipts, shall keep records of all monies paid and received and shall carry on the necessary correspondence.
7. Accounts  may  be  opened  at  the  discretion  of  the  Supervisory Committee with any one or more banks in Jersey in the name of the Society, and the Society shall pay into the said bank or banks to the credit of the Society all monies received to enable the Society to carry out all financial transactions relating to the day to day operations of the Society's business.

All monies withdrawn or transferred from any account in the name of  the Society shall only be withdrawn or transferred in accordance with  the procedures set out in the Society's Bye-Laws.  

8. The  Board  of  Administration  shall  determine  the  nature  of  the  information to be obtained from any person desirous of becoming a  member of the Society and shall cause a proposal form to be prepared  indicating the information so required.  

Any  person  desiring  to  become  a  member  of  the  Society  must  complete and sign the proposal form in the manner required by its  terms.  

Should the proposal be accepted, the Board of Administration shall  determine the class in which the property is to be insured and the  contribution to be paid, and the person desiring to become a member  of the Society shall forthwith become a provisional member of the  Society and shall be bound by these Rules and the Bye-Laws for  giving effect thereto. The Board of Administration shall be entitled to  reject  any  proposal  for  membership.  Should  any  proposal  for  membership be rejected by the Board of Administration as aforesaid,  the provisional member shall cease to be a member of the Society at  the expiration of ten days from the date of the notice of such rejection,  but  shall  be  liable  to  pay  to  the  Society  a  proportion  of  the  contribution for the time on risk. A member shall (subject however to  Rule 11) continue as such until he receives a notice from the Board of  Administration  refusing  to  continue  the  insurance  for  the  ensuing  year.  

Every member of the Society shall every year pay his contribution to  the Society on or before the day and month when he first became a  provisional member. Any member who shall in any year fail to pay  his  contribution  on  the  day  and  month  aforesaid  shall,  unless  otherwise determined by the Board of Administration, cease to be a  member of the Society at the expiration of thirty days from the date  upon which such contribution became payable.  

9. In the event of the whole or any part of the insured property being  covered by other insurers the member shall give written notice of this  fact to the Society and in the event of loss or damage covered by  insurance  with  the  Society  this  latter  shall  be  liable  only  for  a  contribution  to  such  loss  or  damage  in  the  proportion  which  the  amount in which the property is insured with the Society bears to the  total amount in which the property is insured with the Society and the  other insurers; it being understood that the Society shall be liable  (within the limits hereinbefore declared) jointly with the other insurers  for the whole of such loss or damage.  
10. In the event of any valid claim being made in respect of any one or  more of the risks accepted by the Society the amount of the loss shall  be taken from the funds or capital of the Society and, in the event of  these being insufficient, the amount shall be raised by a call on all the  

members of the Society in the manner prescribed by, and subject to the limits set out in, Rule 16. The Board of Administration shall have power to rebuild, repair or restore the destroyed or damaged property to its original state should it deem such a step to be in the interests of the Society.

11. The Board of Administration shall have the right at any time to refuse to continue to insure the property of any member but shall not do so unless it has given to the member not less than ten days' notice in writing of its intention so to do and every such notice shall contain an intimation that, if within ten days after the receipt of the notice the member  informs  the  Board  of  Administration  in  writing  that  he desires so to do, the Board of Administration will, before refusing to continue the insurance, give him an opportunity of being heard, in person or by a representative. Should the Society exercise the right given to it by the present Rule, the Society shall refund to the member whose property the Society shall have refused to continue to insure a fair and just proportion of any contribution paid in advance by such member.
12. If a member intends to make a claim in respect of any risk accepted by the Society, such member shall be bound to give written or verbal notice to the Society of such destruction or damage. If such member does not give such notice within 7 days of the date on which the member  becomes  aware  of  the  event,  the  member  may  (at  the discretion of the Board of Administration) lose all right to make a claim in respect of such destruction or damage.
13. Should any dispute arise between a member and the Society in respect of any loss or damage, such dispute may be submitted to the decision of two Arbitrators, one to be named by the Society and the other by the member with whom the Society is in dispute. The Arbitrators thus appointed,  before  entering  upon  the  Arbitration,  shall  select  an Umpire, and the dispute will be determined in accordance with the Society's complaints procedure from time to time in force.

The decision of the Arbitrators or of the Umpire shall be without prejudice to the jurisdiction of the Royal Court.

14. No call (as provided by Rule 10) shall be made on the members of the Society until three weeks have elapsed from the date of the accident.

Any member refusing or neglecting to pay a call in the course of ten days after having been required to do so in writing, shall pay a fine of five pounds. If the fines and calls are not paid in the course of one month the General Manager shall be authorised to take such action as he considers necessary to recover the unpaid amount.

15. The lowest contribution on any policy shall be such amount as may be determined from time to time by the Board of Administration.
16. The accumulated funds of the Society shall form its capital and after provision has been made for expenses of the Society the surplus of the

annual contribution shall be added to the capital.  

If at any time the capital of the Society becomes insufficient to meet  the claims resulting from accidents for which the Society is liable the  members shall make up the insufficiency as may be required, subject  to the maximum contribution required from each member in such  circumstances being limited to no more than five pounds.  

17. The amount of every loss after having been settled by the Board of  Administration shall be paid in the course of three months.  
18. Should a false declaration be made by a member in respect of any  property which results in a Class II (hazardous) risk being classified  as Class I (non-hazardous) risk by the Society, the member may, at  the discretion of the Board of Administration, lose all right to claim  such amount of the insurance arising out of the risks associated with  such property.  

The member shall immediately inform the General Manager should  any  hazardous  trade  be  carried  on  or  any  hazardous  materials  be  stored in or on any property insured by the Society after the date of  the insurance, under a similar penalty of potentially losing all right to  claim the amount of the insurance arising out of the risks associated  with such property.  

19. Should any member knowingly or voluntarily do any act or assist or  participate in any way in any act whereby his property is damaged or  destroyed  by  any  risk  accepted  by  the  Society,  his  contract  of  insurance may, at the discretion of the Board of Administration, be  forfeited and annulled or any payment due to him reduced by such  amount  as  the  Board  of  Administration  shall  determine;  if  after  payment to him by the Society of any sum whatsoever it is proved that  the member in question has committed any such act, he shall be liable  to repay to the Society the full amount so paid to him or such lesser  amount as may be determined by the Board of Administration, in  either case with interest at Bank of England minimum lending rate  from time to time plus two per cent per annum, the whole without  prejudice to any criminal proceedings instituted or to be instituted.  
20. The General Manager shall capture and record on a timely basis and  in an orderly fashion every financial transaction relating to monies  received or paid by the Society.  
21. Should  property  insured  by  the  Society  be  sold  or  otherwise  transferred, the seller or transferor shall forthwith inform the Society  of such sale or transfer so as to enable the Society to cancel the policy  covering such property. In such circumstances the Society may, at the  discretion of the Board of Administration, refund to that member a  fair and just proportion of any contribution paid in advance by such  member.  Should  any  such  seller  or  transferor  fail  to  inform  the  Society of such sale, no claim under any policy or policies covering  such property or its contents shall be entertained by the Society unless  

the Society shall have agreed to insure such property or its contents  for the new owner.  

22. A general meeting of members of the Society shall be called by the  President of the Board of Administration during the first week of the  month of December in each year at such place in Jersey as the Board  of Administration shall appoint. Notice of the said meeting shall be  published in accordance with the Society's Bye-Laws.  

The Board of Administration shall present to the members a statement  of accounts closed on the thirtieth day of September of the current  financial year the accuracy of which shall be duly certified by the  auditor appointed as hereinafter provided and which, moreover, shall  be accompanied by a report of the Board of Administration on the  working of the Society during the last preceding twelve months.  

The members present shall elect such number of Directors as they see fit (subject to the number of Directors remaining within any limits set out in the Society's Bye Laws), whether such appointments are to replace those due to retire, to elect additional Directors, or to fill those vacancies on the Board of Administration which have occurred since the  last  Annual  General  Meeting  by  reason  of  death,  incapacity, resignation or otherwise, and they shall appoint an Auditor who shall be a Chartered Accountant or a firm of Chartered Accountants in practice. No Director or other officer of the Society shall, during his period of office, be eligible for appointment as Auditor.

All  alterations  of  and  additions  to  these  Rules  which  are recommended by the Board of Administration may, if duly set out in the convening notice, be debated and decided upon at the Annual General Meeting with a view to their submission to the States.

A copy of the statement of accounts and balance sheet and of the report of the Board of Administration (all of which documents shall bear the Seal of the Society) shall be filed by the General Manager with any governmental or regulatory bodies with whom the Society is required, by the laws and regulations to which the Society is from time to time subject, to file such documents.

The Society's Seal shall not be affixed to any account whatsoever except it be in the presence of at least two Directors of the Board of Administration or of one such Director and the General Manager, who shall sign every such document to witness their presence.

The Society shall have a Public Office in the town of St. Helier , and any  change  of  address  shall  be  notified  to  any  governmental  or regulatory bodies with whom the Society is required, by the laws and regulations to which the Society is from time to time subject, to notify such changes.

23. A Special General Meeting may be convened at any time by the Board of  Administration  or  at  the  request, in  writing,  of  at least twelve members of the Society, indicating the purpose of the meeting. Notice

of  every  such  meeting  shall  be  published  in  accordance  with  the  Society's Bye-Laws.  

Each member shall have a right to one vote at all General Meetings,  whether Special or Annual.  

Any  member  present  shall  have  power  to  make  any  proposition  entailing an alteration to these Rules or the Bye-Laws for giving effect  thereto, either at the Annual General Meeting, or at a Special General  Meeting, provided that notice in writing of such proposition has been  sent to the General Manager not less than twenty-one days before the  date of the Meeting and that, in case of an alteration being proposed to  these  Rules,  such  proposition  shall  be  referred  to  the  Board  of  Administration which shall report thereon.  

All proposed alterations, whether to these Rules or to the Bye-Laws  for giving effect thereto, shall appear on the convening notice.  

In the event of any conflict between the Bye-Laws and these Rules,  these Rules shall prevail.  

24. The  Board  of  Administration  shall  have  power,  and  is  hereby  authorised,  to  purchase  in  perpetuity  for  and  in  the  name  of  the  Society (subject to the approval of a Special General Meeting) such  real property as it may consider most convenient for the purpose of  providing  permanent  offices  for  carrying  on  the  business  of  the  Society.  
25. If the aggregate values insured fall below one million pounds sterling  the Society shall be dissolved and the Directors shall immediately  convene a Special General Meeting of the members of the Society to  name a Liquidator; such dissolution to take effect one month after the  date of the meeting.  

Should this Special General Meeting not be convened in the course of  eight days, or should the meeting, when convened, fail to name a  Liquidator, it shall be lawful for any member or creditor to apply to  the Royal Court to name a Liquidator.  

26. If the Society is dissolved at any time, the members of the Society at  the time of the dissolution shall alone have the right to participate in  the assets of the Society in proportion to the amounts for which they  are then insured, and they shall be responsible for the debts of the  Society in the same proportions, subject to the maximum contribution  required from each member in such circumstances being limited to no  more than five pounds. Any amounts due from the members under  this Rule 26 shall be raised by a call on all the members of the  Society.  
27. Save in the case of liquidation or dissolution, the accumulated funds  of the Society shall only be used to meet claims arising from the risks  accepted by the Society, for the expenses necessary for the efficient