When private sector companies take on risk they typically seek to insure against this risk if insurance is available and if it is not too costly. To make the PSC and Shadow Bid comparable in situations where the owner self-insures (bears the cost) when a retained risk occurs, an adjustment is made to the PSC model for insurance premiums paid by the private sector, based on current insurance cost estimates and insurance costs from precedent projects. These premiums reflect the actual value of these risks if they were retained and self-insured by the public sector under traditional procurement.
Further detail on the insurance value of risk is provided in Section 4.2.5.