I have mentioned insurance for nuclear power plants in previous blog posts but have never really gone into nuclear insurance in detail. At the World Nuclear Association's 2014 Symposium in London, Mark Tetley, the managing director of the power, nuclear and construction division at Lloyd's broker Price Forbes discussed nuclear insurance. "It is my belief that insurers could do more. We could provide cost effective, materially higher financial support for the nuclear industry, reducing the burden of accident costs that currently falls to governments and taxpayers, and thus improving the industry's image," he said.
There are two types of nuclear insurance for operating nuclear power plants. The first type of insurance covers the plant, building and income stream of the owners. The second kind of nuclear insurance covers payments to victims of nuclear accidents at a plant. This type of nuclear insurance is based on international treaties drawn up when nuclear power was young. An important feature of the treaties is a cap on the liability of a nuclear plant operator for damage caused and harm inflicted by a nuclear accident. Tetley says that the national and local laws based on these treaties are out of date. Both the nuclear industry and the insurance business have grown enormously since the treaties were implemented.
In the United States, the Price Anderson Act limits the liability of nuclear plant operators in case of accidents. Once the cost of an accident has passed a half a billion dollars, then additional costs are supposed to be covered by the assets of the owners of the nuclear power plant where the accident occured. Unfortunately, it is not improbable that a company might not be able to pay all the additional costs and would have to declare bankruptcy. In this situation, the additional costs would have to be borne by the U.S. taxpayers.
Only the first three hundred and seventy five billion dollars of an accident are covered by insurance in the U.S. There is a fund that all U.S. nuclear power plant operators would pay into in the event of a major nuclear accident. Currently, that fund would collect about thirteen billion dollars. Estimates of the cost of the Fukushima accident are currently at forty billion dollars and the estimated cost of the Chernobyl accident in Ukraine is over eighty billion dollars. In light of previous major accidents, the thirteen billion dollar fund of the U.S. is not even nearly enough.
International treaties on nuclear liability are currently in the process of implements a broader definition of nuclear damage which must be compensated. This includes considering compensation claims for up to thirty years after an accident. Insurers say that they simply cannot afford to offer insurance that would satisfy the new requirements. In addition, different countries have chose different limits on nuclear liability. Belgium caps liability at about a billion and a half dollars while China caps liability at forty five million. This is a huge different. Trying to comply with all the different caps and regulations across the globe is very difficult for international insurance companies.
(See Part 2)