1 Definitions
1.1 In each part of this Part 4 of Schedule 21, the following expressions (in addition to those specified in Schedule 1 (Definitions, Interpretation and Construction)) shall, save where the context or the express provisions of this Contract otherwise requires or admits, have the following meanings:
Actual Reduction has the meaning given to it in paragraph (b)(i) of the definition of Base Relevant Insurance Reduction
Actual Relevant Insurance Cost means the aggregate of the [annual] insurance premiums reasonably incurred by the Service Provider to maintain the Relevant Insurance during the Insurance Review Period but excluding insurance premium tax and all broker's fees and commissions
Base Cost means [♦] pounds (£♦) being the amount as agreed at the Bid Date and set out in the Base Case Financial Model which represents the insurance costs (which excludes amounts in respect of insurance premium tax and all brokers' fees and commissions) which are proposed to be incurred to maintain the Relevant Insurance in each year following the Service Commencement Date, expressed in real terms as at the Bid Date
Base Relevant Insurance Cost means, the aggregate of the Base Costs which were (at Bid Date) projected to be incurred to maintain the Relevant Insurance during the Insurance Review Period indexed by actual RPI from the Bid Date up to the dates on which the Relevant Insurance was placed or renewed either immediately before or during the Insurance Review Period (as applicable in respect of the year in question) less any Base Relevant Insurance Reduction
Base Relevant Insurance Reduction the reduction to be made to the Base Relevant Insurance Cost in respect of a risk which has become Uninsurable or a term or condition which is no longer available and shall be an amount that is either:
(a) the amount by which the Base Relevant Insurance Cost would have been a lesser amount had such a risk been Uninsurable or such a term or condition been unavailable at the Bid Date (which amount, for the avoidance of doubt, can be zero (£0)); or
(b) if it is impossible to determine an amount pursuant to paragraph (a), an amount that is reasonable to be deducted from the Base Relevant Insurance Cost having due regard to:
(i) the amount by which the Actual Relevant Insurance Cost is less than it would have been as a result of the risk becoming Uninsurable, or the term or condition becoming unavailable (the Actual Reduction);
(ii) the size of the Actual Reduction as a percentage of the Actual Relevant Insurance Cost immediately prior to the risk becoming Uninsurable, or the term or condition becoming unavailable; and
(iii) the effects of RPI since the Bid Date
Exceptional Cost means, for an Insurance Review Period, the extent to which there is an Insurance Cost Increase which exceeds in amount thirty per cent (30%) of the Base Relevant Insurance Cost for that Insurance Review Period
Exceptional Saving means, for an Insurance Review Period, the extent to which there is an Insurance Cost Decrease which exceeds in amount thirty per cent (30%) of the Base Relevant Insurance Cost for that Insurance Review Period
First Insurance Review Date means the first Business Day following the first anniversary of the Relevant Insurance Inception Date
Insurance Cost Decrease means the Insurance Cost Differential if the value thereof is less than zero, multiplied by minus one
Insurance Cost Differential shall, subject to the Insurance Review Procedure, be determined as follows:
Insurance Cost Differential = (ARIC - BRIC) _ (±PIC)
where:
ARIC is the Actual Relevant Insurance Cost
BRIC is the Base Relevant Insurance Cost
PIC is any Project Insurance Change
Insurance Cost Increase means the Insurance Cost Differential if the value thereof is greater than zero
Insurance Cost Index means any index introduced by the United Kingdom Government or the Office of National Statistics after the date of this Contract and which is anticipated to be published annually to provide an independent and objective measure of changes in prevailing market insurance costs
Insurance Review Date means the First Insurance Review Date and, thereafter, each date falling on the second anniversary of the previous Insurance Review Date, except where such date lies beyond the end of the Contract Period, in which case the Insurance Review Date shall be the last renewal date of the Relevant Insurance prior to the end of the Contract Period
Insurance Review Procedure means the procedure set out in paragraph 2 of this Part 4 of Schedule 21
Insurance Review Period means a two (2) year period from the Relevant Insurance Inception Date and each subsequent two (2) year period commencing on the second anniversary of the Relevant Insurance Inception Date except where the end of such period lies beyond the end of the Contract Period, in which case the Insurance Review Period shall be the period from the end of the penultimate Insurance Review Period to the last day of the Contract Period
Insurance Summary Sheet shall have the meaning given to it in paragraph 2.2(c) of this Part 4 of Schedule 21
Joint Insurance Cost Report shall have the meaning given to it in paragraph 2.2 of this Part 4 of Schedule 21
Portfolio Cost Saving means any insurance cost saving which arises from the Service Provider changing the placement of the Required Insurances from being on a standalone project-specific basis assumed at the date of this Contract and reflected in the Base Cost, to being on the basis of a policy (or policies) also covering risks on other projects or other matters which are outside the scope of the Project so as to benefit from portfolio savings. A Portfolio Cost Saving is defined to be a positive sum and cannot be less than zero
Project Insurance Change means any net increase or net decrease in the Actual Relevant Insurance Cost relative to the Base Relevant Insurance Cost, arising from:
(a) the claims history or re-rating of the Service Provider or any Service Provider Party;
(b) the effect of any change in deductible unless the following applies:
(i) such change is attributable to circumstances generally prevailing in the Relevant Insurance Market; and
(ii) the deductible, further to such change, is either greater than or equal to the maximum set out in Part 1 of Schedule 21;
(c) any other issue or factor other than circumstances generally prevailing in the Relevant Insurance Market, except for any Portfolio Cost Saving.
For the purpose of determining the Insurance Cost Differential, in the event that there is a net increase, the Project Insurance Change shall have a positive value. In the event that there is a net decrease the Project Insurance Change shall have a negative value
Relevant Insurance means the Required Insurances and any other insurances as may be required by legislation
Relevant Insurance Inception Date means the date on which the Relevant Insurance is first providing active insurance cover to the Service Provider, being a date no earlier than the Service Commencement Date
Relevant Insurance Market means the insurance market which insures the majority of all PFI projects across all of the PFI sectors (as determined by the number of PFI projects). At the date of this Contract, the Relevant Insurance Market is in the United Kingdom
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3 This is the date on which the Service Provider has fixed its price prior to appointment as Preferred Bidder.