FM 501
Date of issue: 28 September 2000

CANCELLATION OF PREVIOUS FM

1.     This FM supersedes PPARC FM 22 (formerly SERC FM 10/76) dated 8 October 1976 which is hereby cancelled.

(a)     provide guidance on PPARC policy concerning insurance;
(b)    advise Establishments where PPARC carries commercial insurance; 
(c)    advise Establishments where PPARC does not carry commercial insurance; and
(d)    provide guidance on the circumstances where it may be appropriate to carry insurance and
         the procedures to be followed.

DELEGATED AUTHORITY FROM OST

"The Council may not undertake any insurance, in respect of persons, activities, equipment, land or buildings funded directly or indirectly by the Exchequer, except in order to comply with any statutory obligations other than the Employers’ Liability (Compulsory Insurance) Act 1969 for which an exemption certificate has been issued, or where the undertaking of insurance is consistent with the guidance set out in Government Accounting. Any other circumstances require the prior approval of the OST."

4.     The principles to be followed regarding insurance are contained in Chapter 27 of Government Accounting (GA), copies of which are held by Establishment Finance Officers. Paragraphs 27.4.2 to 27.4.6, the text of which is reproduced at Annex A to this FM, deal with the circumstances in which Non-Departmental Public Bodies (NDPBs), such as PPARC, should contemplate insuring. In general, when considering whether or not it is appropriate to insure, the underlying criterion should be cost-effectiveness ie whether commercial insurance or non-insurance would be expected to offer a better financial outcome. In many instances, except where there is a legal requirement to insure, it will be necessary for PPARC to refer proposals to insure to OST and/or Treasury for approval.

7.     PPARC’s insurance policy also provides comprehensive cover for vehicles hired by PPARC for use in the UK, subject to a £100 policy excess. The cost of any repairs in respect of accidental damage caused to hire vehicles will therefore be reimbursed by PPARC’s insurers, subject to the policy excess. The excess will be met directly by PPARC. If responsibility for the accident rests with either PPARC or PPARC’s employee, then the insurers will also meet the cost of any relevant third party claim. Where an accident is the fault of a known third party, the insurers will take the necessary action including seeking to recover the policy excess from the party responsible.

Vehicles hired overseas

10.     PPARC vehicles purchased and registered abroad should be insured there for the minimum insurance required by the laws of the country concerned except where otherwise agreed with the Head of Finance, PPARC (eg fully comprehensive cover is the norm for vehicles kept for mountain top use by visiting observers). Insurance arrangements should be made through Establishment Finance Officers or their nominees in accordance with locally issued instructions.

Vehicles – general

12.    Staff using privately owned vehicles on PPARC business are responsible for arranging their own insurance - Conditions of Employment Memoranda (CEMs) Chapter 5 B 3.13 refers.

13.     PPARC’s current vehicle insurance policy has been arranged by NERC Contracts Section acting on behalf of NERC and the other Swindon-based Research Councils. Responsibility for liaison rests with Personnel Group, Swindon Office, to whom all enquiries should be addressed. A copy of the policy and certificate of insurance is available on request. Contact details are shown at Annex B to this FM.

16.     As a matter of policy, PPARC does not normally carry insurance in respect of the risk of loss of or damage to its buildings or their contents. This is because such insurance is not considered to be cost effective across Government Departments and NDPBs as a whole.

18.    In developing risk management strategies, Establishments should ensure that the risks faced have been adequately identified and dealt with appropriately. Risk management strategies should be kept under review and modified as necessary to reflect changes in circumstances.

TREATMENT OF INSURANCE IN CALCULATING FEES AND CHARGES

21.     Losses and claims involving vehicles owned by or hired to PPARC at the JACH or the ING are handled in accordance with locally issued instructions. In dealing with any such uninsured losses or claims, Establishments shall have regard to their own delegated authority limits.

22.     In the case of claims from third parties (including members of staff) in respect of loss of or damage to their personal property or personal injury arising through incidents on PPARC’s premises, including industrial accidents, it may be necessary to seek legal advice. In the event of receipt of any such claim PPARC’s Legal Liaison Officer must be consulted without delay.

24.    The advice of PPARC’s Legal Liaison Officer should be sought where Establishments consider there may be a case for recovering PPARC’s uninsured losses from a third party.

25.    All write-offs and losses must be reported to PPARC Finance Division, Swindon Office. Contact details are shown at Annex B to this FM.

SWINDON OFFICE APPROVAL

Jill Drinkwater
Head, Financial Propriety Group, PPARC Finance Division

 

Annex A to FM 501

27.4.2     In deciding whether an NDPB should insure the underlying criterion should be cost effectiveness subject to the provisos set out in paragraph

27.4.3.   The provisos are:

(a)     where there is a legal requirement to insure commercially an NDPB must of course do so; for example, if it is required to comply with the Road Traffic Acts;

(b)     where an NDPB’s costs are not entirely covered by a combination of Exchequer grants and receipts from fees and charges the sponsor department should consider whether non-insurance would mean that the Exchequer might have to bear a disproportionately large share of the costs in the event of a loss or a claim from a third party (to which the other sponsor or sponsors might not be in a position to contribute). As a general rule of thumb where the Exchequer contributes less than half of the non-fee income an NDPB should insure commercially. (For example, if fees and charges accounted for 25 per cent of a body’s income with the Exchequer contributing 35 per cent and another sponsor contributing 40 per cent – the body should insure);

(c)    where a body engages in an "income generation" scheme to supplement the approved level of public funding. In such cases commercial insurance should be taken out to cover the risks to which the "income generation" activities would give rise, to the extent that the cost of any losses could not be met out of the income generated by those activities. The rationale for this requirement is that it would be wrong, as a matter of policy, for the Exchequer to shoulder the risks associated with activities designed to supplement the level of public financing;

(d)    where an NDPB undertakes an operation of a mainly commercial nature and where commercial insurance would not impose an extra cost on the Exchequer or result in public money being used to purchase non-cost-effective commercial insurance at the expense of policy objectives, and a NDPB considers there is a clear case for insuring commercially. The Treasury will be prepared to consider proposals for commercial insurance in such cases in consultation with the sponsor department. Any such types of insurance which it is agreed an NDPB may undertake should be listed in the NDPB’s financial memorandum. (See paragraph 27.4.7.)

27.4.5     NDPBs, like departments, should review their insurance arrangements from time to time (paragraph 27.3.3).

Annex B to FM 501

Address for all listed above:    PPARC                                Finance Fax Number: 01793 442147
                                         Polaris House,                       Personnel Fax Number: 01793 442099
                                         North Star Avenue,
                                         SWINDON,
                                         SN2 1SZ

Last updated: 29 June 2001