Further to our November and December 2014 Bulletins (in which we reported that the Counter-Terrorism and Security Bill had been published following the British Government’s widely-publicised Intelligence and Security Committee report into the murder of Lee Rigby), the Counter-Terrorism and Security Act 2015 (CTSA 2015) was passed into law on 12 February 2015 after a fast-track enactment.
Of particular importance to the London insurance industry, Section 42 the CTSA 2015 adds a new Section (Section 17A) to the Terrorism Act 2000 (TA 2000) which makes it an offence for an insurer to make payments in response to terrorist demands. Specifically, the new Section 17A(1) of the TA 2000 provides that it is an offence for an insurer to make a payment under an insurance contract (or purportedly under it) if:
- That payment is in respect of any money or other property that has been, or is to be, handed over in response to a demand made wholly or partly for the purposes of terrorism; and
- The insurer (or the person authorising the payment on the insurer’s behalf) knows or has reasonable cause to suspect that the money or other property has been, or is to be, handed over in response to such a demand.
Unfortunately, (as foreshadowed in our November 2014 Bulletin) some ambiguity is introduced into the TA 2000 by the unhelpfully vague words “wholly or partly for the purposes of terrorism” in Section 17A(1)(b).
The CTSA 2015 provides that the new legislation applies to all reimbursements made by insurers on or after 12 February 2015, even if made under, or purportedly under, a contract entered into before then. Insurance payments made in respect of money or other property handed over before 27 November 2014 are not caught by the offence, although other rules may still be applicable.
A person guilty of an offence under this new section of the TA 2000 is liable on conviction on indictment to imprisonment for up to 14 years and/or a fine, or on summary conviction to imprisonment up to six months and/or a fine. In addition, the court may order the forfeiture of the amount paid under, or purportedly under, the insurance contract.
Whilst the CTSA 2015 can be praised for aiming to reduce terrorist funding during a time of apparently heightened threat from terrorism, it is open to question whether Section 17A itself tackles the real problem of terrorist financing. In terms of its practical impact within the insurance market, Section 17A of the TA 2000 may mean that insurers and reinsurers will have to take further steps when carrying out due diligence in relation to payments made to assureds in this context. Insurers should consider taking professional advice where necessary in light of these changes.
HFW will be producing a full briefing on the further implications of the CTSA in due course.