2 "Insurance Review Procedure"52

2.1 This procedure shall be used to determine whether the Authority shall bear any increase or benefit from any decrease in Relevant Insurance costs.

2.2 The Contractor's insurance broker shall prepare a report on behalf of both the Contractor and the Authority (the "Joint Insurance Cost Report"). The Report is to be prepared at the Contractor's expense, and should, as a minimum, contain the following information for the relevant Insurance Review Period:

(i) A full breakdown of the Actual Relevant Insurance Cost;

(ii) A full breakdown of the Base Relevant Insurance Cost;

(iii) A spreadsheet (the "Insurance Summary Sheet") detailing separately:-

(A) the sum(s) insured/limit of indemnity (i.e rateable factor) for each of the Relevant Insurances;

(B) the premium rate for each of the Relevant Insurances;

(C) the net premium paid (or to be paid) for each of the Relevant Insurances (i.e. excluding both insurance premium tax and brokers' fees and commissions);

(D) the deductible(s) for each Relevant Insurance; and details of any claims (paid or reserved) (including incident date, type and quantum) in excess of £[ ],53 being the amount stated in Clause [17.2(i)];

(iv) An assessment and quantification of each Project Insurance Change together with the reasons therefore;

(v) Full details of any Portfolio Cost Saving;

(vi) Any other reasons that the Contractor believes may have caused a change (by way of increase or decrease relative to the Base Relevant Insurance Costs) in the Actual Relevant Insurance Cost;

(vii) The opinion of the Contractor's insurance broker as to the reasons why the Actual Relevant Insurance Cost has varied from the Base Relevant Insurance Cost, specifying the impact of each of the factors and quantifying the amount attributable to each factor specified above;

(viii) The calculation of the Insurance Cost Differential and any Exceptional Cost or Exceptional Saving arising from this calculation;

(ix) Evidence satisfactory to the Authority (acting reasonably) of any changes to circumstances generally prevailing in the Relevant Insurance Market that are claimed to account for the Insurance Cost Differential; and

(x) Details of movements from a recognised insurance index54 plus, if available from other appropriate sources, details of changes in insurance cost across the PFI/PF2 market as a whole.55

2.3 The Contractor shall procure that the Broker, no later than the date which is ten (10) Business Days after the Insurance Review Date, delivers to the Authority, at the same time as it delivers to the Contractor, at least two copies of the Joint Insurance Cost Report. At the same time the Contractor should send a copy of the Insurance Summary Sheet to HMT at PPP-Insurance@hmtreasury.gsi.gov.uk or such other address as HMT shall specify from time to time. Following receipt of the Joint Insurance Cost Report, the Authority shall notify the Contractor in writing within fifteen (15) Business Days whether or not it accepts the Joint Insurance Cost Report including full details of any disagreement.56 If the Authority does not provide such notification and/or details of any disagreement to the Contractor within fifteen (15) Business Days, the Authority shall be deemed to have accepted the Joint Insurance Cost Report. If the Authority disagrees with any item in the Joint Insurance Cost Report, the Parties shall use their respective reasonable endeavours acting in good faith to agree the contents of the Joint Insurance Cost Report.57 If the Parties fail to agree the contents of the Joint Insurance Cost Report within thirty five (35) Business Days from the date it was delivered to the Authority, the matter shall be resolved pursuant to Clause 34.2 (Dispute Resolution), provided always that references in Clause 34.2 (d) (Dispute Resolution) to an expert shall be construed as references to an independent insurance expert agreed by the Parties or, in the absence of agreement, appointed by the President for the time being of the Chartered Institute of Arbitrators.

2.4 The Authority may make the Joint Insurance Cost Report available to any of its or HMT's agents or advisers or other body or bodies nominated by HMT for insurance cost verification, benchmarking or similar purpose.

___________________________________________________________________________________________________________

52 The insurance review procedure takes place around each Insurance Review Date. The cost of insurance for the previous year and the cost of insurance for the current year are assessed at each review. With the exception of the first review, which takes place one day after the first insurance renewal, and possibly, depending on the Contract Period, the last review, all other reviews will take place biennially.

53 This amount should correspond to the amount agreed under Clause 17.2 (i) .

55 A source for such data could be nominated by HMT to act as custodian of the Insurance Summary Sheets.

56 The Authority should consider employing the services of a fully 'independent' insurance advisor to confirm the accuracy of the information in the Joint Insurance Cost Report.

57 This may involve observing how insurance costs have changed during the same period across a representative sample of PFI/PF2 projects from all of the PFI/PF2 sectors. Such information is likely to be available from a number of sources. The collation of Insurance summary Sheets centrally should facilitate this exercise.