As mentioned in Section 1.2.1.4, the Contracting Authority should consider what insurances the Private Partner is required to have under the PPP Contract. The availability and cost of, and the obligation to take out, relevant insurances will be relevant to how the risk of certain events is allocated (such as Force Majeure events), as well as to what deductions may be applied to termination payments in respect of insurance proceeds receivable.
Equity Investors and Lenders may seek protection in the PPP Contract for the Private Partner in case required insurance cover becomes unavailable, less extensive or more costly. Without express contractual protection, uninsurability risk will typically lie with the Private Partner (who will also be in breach of its obligations to maintain the unavailable insurance). This is likely to attract a pricing premium (if indeed it is bankable), depending on the circumstances of the PPP Project and the risk assessment conducted by the Private Partner and its Lenders. Some jurisdictions may address uninsurability though general law provisions, or may not recognize the concept of uninsurability25. The Contracting Authority should therefore take specialist advice on how relevant contractual provisions may interplay with general law.
Where there is a known risk of uninsurability in respect of a particular required insurance at the time the PPP Contract is being negotiated (for example, insurance against terrorism or vandalism), this may be addressed through bespoke contractual provisions.
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25 See reference to Bulgaria in Termination and Force Majeure Provisions in PPP Contracts - Review of current European practice and guidance (March 2013) - EPEC/Allen & Overy LLP. See link in Appendix, Additional PPP Resources.