Allowance should be made for insurable and uninsurable risks. The PSC should contain the notional cost of insuring a particular risk if passed to the private sector that may not otherwise be insured if retained by the public sector.
Some of the risks to be passed to the private sector may not be insurable. The return that the private sector may require for accepting uninsurable risks depends of course on the severity of the risk. For example, the private sector may be extremely reluctant to accept the risk of a change in legislation that may affect the viability of the project in its entirety and will charge a prohibitive price for accepting this risk, or refuse to accept it at all. These sorts of risks are best retained by the public sector as a "self-insured" risk.
The cost of uninsured risk must nevertheless be estimated in the PSC. If an accurate estimate of the insurance premium is not available, the notional "premium" should reflect the severity of the loss incurred, adjusted for the likelihood of its occurrence.
Care must be taken not to include the cost impact of risks that are fully insured in the PSC. In these cases, only the direct cost of insurance should be included in project costing data.