Miscellaneous Reinsurance for acts of terrorism
In some instances, HM Treasury intervenes in the (re)insurance market to support the provision of insurance for certain systemic risks. This is when the risks would not otherwise be covered by the market because the potential financial losses are deemed too great by commercial (re)insurers. In cases of terrorism, HM Treasury has agreements with reinsurers under which it offers an unlimited guarantee (in the form of an unlimited loan) should they exhaust their funds in the event of pay-outs pursuant to a terrorist attack.
	Under the Reinsurance (Acts of Terrorism) Act 1993 ("the 1993 Act"), HM Treasury has Parliamentary approval to pay out funds in line with these agreements. This enables the widespread provision of terrorism insurance in Great Britain. The 1993 Act was introduced when, following a number of terrorist attacks in Great Britain, (re)insurers withdrew from the terrorism (re)insurance markets. The 1993 Act enables the government to act as the reinsurer of last resort for reinsurance companies offering terrorism cover.
	In accordance with its current practice, the Office for National Statistics ("ONS") is likely to classify a company that enjoys the benefit of a guarantee under the 1993 Act as a public sector body. Such classifications are likely to be retrospective to the date that the company started to enjoy the benefit of a guarantee under the 1993 Act.
	The consequences of a company being classified as a public sector body include a requirement that its accounts are consolidated into its sponsor department’s departmental accounts (as required by the Government Resources and Accounts Act 2000), and it becomes subject to necessary and appropriate controls, standards and processes expected of a public sector (which may include central government) body, in line with government policy and the expectations of Parliament on the use of funds on the public account. This could include, for example, Managing Public Money ("MPM") guidance.
	In order to secure compliance with the requirements associated with classification as a public sector body, sponsor government departments generally put in place Framework Documents with entities subject to this classification. Framework Documents are not legally enforceable. HM Treasury therefore needs to ensure that any entity classified as a public body that benefits from an arrangement under the 1993 Act, will comply with necessary controls so that money on the public accounts is managed appropriately.
	This provision in this Act amends the 1993 Act to give HM Treasury the power to issue directions to any public sector body which benefits from an arrangement under the 1993 Act. The provision also provides HM Treasury with the ability to issue a direction to the group undertakings (within the meaning of section 1161 of the Companies Act 2006) of public sector bodies which benefit from an arrangement under the 1993 Act. HM Treasury may issue a direction if it considers it necessary for the purpose of ensuring compliance with any requirements associated with classification as a public sector body. Directions may include provision about compliance with relevant requirements relating to auditing, accounting, budgeting, arm’s length bodies or public sector bodies. There is also a specific power to direct such bodies to appoint an accounting officer. This will enable HM Treasury to ensure that any public sector body that benefits from a guarantee has sufficient oversight of its requirements as a public sector body.