25.12.1 This Contract schedule sets out the Authority's Required Insurances requirements. The Standard Required Insurance Schedule ("SRIS") as set out below broadly reflects the insurance provisions included in the insurance schedule for the majority of PFI projects.
25.12.2 Variations from the SRIS should be kept to a minimum and Authorities should be aware that the broader the scope of the insurances, the greater the possibility that uninsurability protection will apply. However since this is a generic document, a limited level of adjustment may be appropriate during negotiations. This should be determined by the Authority in conjunction with its insurance adviser, to ensure that the provisions in the insurance schedule are tailored to the requirements of each Project. Project-specific modifications could, for example, include:-
• insertion of an appropriate limit of indemnity for the third party liability policies;
• a change to the period of insurance in the event that service commencement is phased, or construction extends beyond service availability date, e.g. a multi-site facility;
• addition or deletion of project specific extensions and relevant footnotes;
• inclusion of additional insurance cover where appropriate;
• insertion of a figure for each maximum deductible;
• change to the jurisdiction and/or territorial limits under the third party liability policy; and
• changes to reflect the unique arrangements in relation to events caused by terrorism in Northern Ireland.
25.12.3 In addition to the project-specific amendments, the drafting may to some extent need to be amended to reflect the availability of insurance generally, including the main terms and conditions in the prevailing insurance market. In particular, the detailed endorsement wordings in Part 3 may need to be amended should market circumstances change.
25.12.4 For the reason given in Section 25.2.2, professional indemnity insurance should not be included as a Required Insurance. Additional reasons for excluding this insurance from the Required Insurances include the following:
• it will not be possible for the Authority to be named as an additional insured and thus benefit directly from the insurance policy; and
• when placed on a project specific basis this tends to be very expensive and provide only limited additional comfort to the insured party.
25.12.5 Maximum deductibles should primarily be set at a level which reflects the maximum level of exposure which an Authority is reasonably able to bear for any of its own losses and which the Contractor could bear for its own losses. The main determinant should not be the lowest deductible limit available in the prevailing market. For many projects it is anticipated that the maximum deductible could be higher than that which is available in the prevailing market.
25.12.6 Section 25.10.1 states that uninsurability protection is intended to apply to risks only (rather than the availability of cover upon particular terms or conditions). The risks which benefit from uninsurability protection are those which are covered by the Required Insurances and any other risks covered by statutory insurance. If a risk is Uninsurable and the uninsurability test in Clause 25.10 is satisfied, the Authority may, on the occurrence of a loss (or, in respect of third party liability at the time that the risk becomes Uninsurable) terminate the Contract and pay compensation to the Contractor equivalent to an amount payable on a Force Majeure termination in accordance with Clause 25.10(b)(i) and (ii). This payment will therefore not represent "full" compensation as equity repayment will be limited to par value less Distributions paid to date. This provision serves to control the extent to which uninsurability protection is relied upon.
Suitable drafting is set out in Annex 3.