7.3  Relevance of insurance

If a Transferred Risk is commercially insurable, the value of that risk can be approximated by the periodic cost of the applicable commercial insurance premium. Commercial insurance is available to cover a number of risks including construction and contractor insurance, equipment failure and technology risk. However, where government reasonably expects to be able to manage a risk at a lower cost, or the risk is to be transferred under a public procurement, insurance would not be taken out and should not be used as the proxy value in a PSC.

This can be contrasted with Retained Risks, where commercial insurance premiums would instead be included as a cost in the Raw PSC where commercial insurance would be taken out. Treatment of insurable Retained Risks is discussed in Section 8.3.