Alex, we are not hotels, most of the people contributing to this thread are renting a bedroom and being their own homes, are free to enforce these kind of rules.
You have to remember, not only are these our homes, but they contain all our goods and chattels and irreplaceable family treasures. Therefore it is not unreasonable to request 'no guests of guests'.
Then of course the insurance issue is not generally important UNTIL it is.
I personally don't think it's worth the possibility of losing everything you've worked for, this may seem extreme but we have a staircase and a pool and there's two reasons right there, if a guest of a guest falls down our stairs and becomes paralysed then we are effectively 'screwed' and it's simply not worth it.