Professional Indemnity Insurance Guidance Note (June 2018)

Summary

This guidance note from the Jersey Financial Services Commission explains how Registered Persons should meet the Professional Indemnity Insurance (PII) requirements set out in the JFSC's Codes of Practice for investment business, trust company business, general insurance mediation business and fund services business. It does not itself impose new rules but clarifies existing Code obligations around obtaining, assessing, and maintaining adequate PII cover.

• Policy exclusions: Standard market exclusions (e.g. employer's liability, war/terrorism, pollution) need not be notified, but exclusions specific to the Registered Person's business, or exclusions relating to historical/current activities or newly commenced activities, must be notified to the JFSC.
• Obtaining cover: Registered Persons should use qualified/licensed brokers, carefully review proposal forms before submission, and start renewal negotiations in good time; policy wording must be scrutinised for adequacy, including Financial Services Ombudsman exposure.
• Board oversight: The Board must periodically assess and document the adequacy of PII arrangements, including in light of business model changes and cyber-crime risk, and must ensure minimum Code indemnity limits are met and are sufficient.
• Loss of cover: If a Registered Person cannot obtain Code-compliant cover, or its policy is cancelled, it must notify the JFSC as soon as reasonably practicable.
• Variances: A Registered Person may request a written variance from the JFSC where strict Code compliance produces an anomalous result (e.g. excess levels, self-insurance); granted variances typically require additional funds to be held and must be reviewed at least annually.
• Group PII arrangements: Where cover is provided under a group policy, the Board must assess and document that the Registered Person has adequate access to indemnity, obtain written assurance if not named in the policy, and notify the JFSC of the group arrangement if not already done.
• Policies and procedures: Registered Persons must maintain documented policies and procedures covering obtaining/renewing PII, making notifications, and periodic Board review of adequacy.
• Retroactive dates: Any retroactive date in a PII policy must be notified to the JFSC together with an explanation of the reason and its effect on cover.
• Excess/deductible: Any excess or deductible must not reduce the limit of indemnity actually payable under the policy.
• Transitional circumstances: Where a need to amend PII cover is identified, the Registered Person must document mitigating actions taken until full Code compliance is achieved.

Overall, the note reinforces that ultimate responsibility for adequate PII cover rests with the Board, and that a range of specific notification obligations to the JFSC arise around exclusions, cancelled cover, retroactive dates, and group policy arrangements.

Key obligations

• Notify the JFSC of PII policy exclusions or limitations specific to the Registered Person's business, or relating to historical/current/newly commenced activities not covered by insurance.
• Notify the JFSC as soon as reasonably practicable if unable to obtain Code-compliant PII cover or if the policy is cancelled.
• Board must periodically assess and document the continuing adequacy of PII arrangements, including in light of business model changes.
• Where covered by a group PII policy, the Board must assess and document adequacy of cover for the Registered Person and notify the JFSC of the group arrangement if not previously notified.
• Obtain written assurance from insurer/broker where the Registered Person is not specifically named in a group PII policy.
• Maintain documented policies and procedures for obtaining/renewing PII, making notifications, and periodic Board review of adequacy.
• Notify the JFSC of any retroactive date in a PII policy, with explanation of its cause and effect on cover.
• Ensure any excess or deductible does not reduce the limit of indemnity payable under the policy, as required by the Codes.
• Where a variance from PII Code requirements has been granted, document and review the adequacy of cover at least annually.
• Where a requirement to amend PII cover is identified, document mitigating actions taken until full compliance with the Codes is achieved.
• Submit written requests to the JFSC's relevant supervision manager or team for any variance of PII Code requirements.

Applies to

investment business, trust company business, general insurance mediation business, fund services business, Registered Persons under the Financial Services (Jersey) Law 1998