1.2.1.4 Insurance -

Contracting Authorities typically require the Private Partner to insure material project risks (e.g. accidental damage, third party liabilities). In the early days of PPPs, the definition of Force Majeure was often based on whether a particular event could be insured against. If there was insurance for a specific political or natural event, it could not be regarded as Force Majeure. Conversely, "uninsurable" events tended to be treated as Force Majeure. Currently, the relationship between insurability and Force Majeure is less straightforward, although the ability of the Parties to insure against certain risks, and to bear the relevant insurance premium costs, must be considered when defining Force Majeure events and related compensation provisions. It may be appropriate to exclude certain insurable events from the Force Majeure definition as the Private Partner is able to manage the risk thorough insurance (and will have factored the premium cost into its pricing). Equally, if the insurable event is agreed to be a Force Majeure event, this will influence any additional relief that may be agreed by the Contracting Authority. Insurance proceeds paid23 (other than to compensate third parties) may also be deducted from any termination amount payable. The Contracting Authority should also expect that the costs of insurance will be reflected in pricing - either ultimately being passed on to third party users via the approved tariff or fee (under the "user pays" model) or to the Contracting Authority itself (under the "government pays" model).

Generally, uninsurability is addressed in separate provisions, although some jurisdictions may not recognize the concept of uninsurability or may not typically address it contractually due to the existence of general law provisions. For further detail see Section 1.3 and definition of "Uninsurability".

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23 Or, depending on the jurisdiction, and timing of actual payment by the insurers, payable.