53.4  Uninsurable Risks

The parties agree that:

(a)  If a risk usually covered by the Required Insurances or statutory insurances becomes Uninsurable then:

(i)  the Service Provider shall notify the Authority within five (5) Business Days of the risk becoming Uninsurable; and

(ii)  if both parties agree, or it is determined in accordance with the Dispute Resolution Procedure that the risk is Uninsurable and that:

(A)  the risk being Uninsurable is not caused by the actions of the Service Provider or any sub-contractor of the Service Provider; and

(B)  the Service Provider has demonstrated to the Authority that the Service Provider and a prudent board of directors of a company operating the same, or substantially similar, PFI businesses in the United Kingdom to that operated by the Service Provider would, in similar circumstances (in the absence of the type of relief envisaged by this clause 53.4), be acting reasonably and in the best interests of the company if they resolved to cease to operate such businesses as a result of that risk becoming Uninsurable, taking into account inter alia (and without limitation) the likelihood of the Uninsurable risk occurring (if it has not already occurred), the financial consequences for such company if such Uninsurable risk did occur (or has occurred) and other mitigates against such consequences which may be available to such company,

the parties shall meet to discuss the means by which the risk should be managed or shared (including considering the issue of self-insurance by either party).

(b)  If the requirements of clause 53.4(a) are satisfied, but the parties cannot agree as to how to manage or share the risk, then:

(i)  in respect of third party liability insurance only the Authority shall (at the Authority's option) either serve a Termination Notice on the Service Provider and pay to the Service Provider an amount equal to the amount calculated in accordance with Section 5 of Schedule 24 (Compensation following a Force Majeure Event or Uninsurability) and this Contract shall terminate, or elect to allow this Contract to continue and clause 53.4(b)(ii) shall thereafter apply in respect of such risk;

(ii)  in respect of the Required Insurances (but not the statutory insurances [or any loss of profit insurance]42) (if the Authority elects to allow the Contract to continue in accordance with clause 53.4(b)(i)), the Contract shall continue and on the occurrence of the risk (but only for as long as such risk remains Uninsurable) the Authority shall (at the Authority's option) either pay to the Service Provider an amount equal to insurance proceeds that would have been payable had the relevant insurance continued to be available and the Contract will continue, or serve a Termination Notice on the Service Provider and pay to the Service Provider an amount equal to the amount calculated in accordance with Section 5 of Schedule 24 (Compensation following a Force Majeure Event or Uninsurability) plus (in relation to third party liability insurance only) the amount of insurance proceeds that would have been payable whereupon the Contract shall terminate;

(iii)  where pursuant to clause 53.4(b)(i) and/or 53.4(b)(ii) this Contract continues then the Unitary Charge shall be reduced in each year for which the relevant insurance is not maintained by an amount equal to the premium paid (or would have been paid) by the Service Provider in respect of the relevant risk in the year prior to it becoming Uninsurable (indexed from the date that the risk becomes Uninsurable).  Where the risk is Uninsurable for part of a year only the reduction in the Unitary Charge shall be pro rated to the number of months for which the risk is Uninsurable;

(iv)  where pursuant to clause 53.4(b)(i) and/or 53.4(b)(ii) this Contract continues the Service Provider shall approach the insurance market at least every four (4) Months to establish whether the risk remains Uninsurable.  As soon as the Service Provider is aware that the risk is no longer Uninsurable, the Service Provider shall take out and maintain or procure the taking out and maintenance of insurance (to be incepted as soon as is reasonably practicable) for such risk in accordance with this Contract and clause 53.4(b)(iii) shall no longer apply;

(v)  if, pursuant to clause 53.4(b)(ii), the Authority elects to make payment to the Service Provider (such that the Contract terminates) (the Relevant Payment), the Service Provider shall have the option (exercisable in writing within twenty (20) Business Days of the date of such election by the Authority (the Option Period)) to pay to the Authority on, or before, the end of the Option Period, an amount equal to the insurance proceeds that would have been payable had the relevant risk not become Uninsurable, in which case this Contract shall continue (and the Relevant Payment shall not be made by the Authority).  The Service Provider's payment shall be applied for the same purpose and in the same manner as insurance proceeds would have been applied had the relevant risk not become Uninsurable.

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42  If loss of profit is a Required Insurance, insert carve out shown in brackets.