The UK nuclear insurance pool has expanded its capacity to EUR1.2 billion (USD1.4 billion), which will provide the "insurance certainty" to allow the nuclear sector to support the net zero transition, London-based Nuclear Risk Insurers (NRI) said yesterday. It has finalised its position on covering the extensions of liability created as part of the 2004 Protocol Amendment to the Paris Convention which comes into force on 1 January 2022.The UK's Sizewell B nuclear power plant (Image: EDF)
"Following 20 years of positive discussions with government, nuclear operators and NRI members (capacity providers) about how best to provide the broader coverage to meet several significant expansions of liability for nuclear operators, NRI has been able to increase its insurance capacity in the UK from around EUR200 million in 2004 to EUR1.2 billion today, thus meeting government policy that the nuclear industry increases compensation following a nuclear incident to this level," the NRI - which is the UK insurance market's underwriting agent for all matters of nuclear insurance - said yesterday.
NRI Managing Director Mark Popplewell said an "incredible amount of innovation and hard work" had been required from all key participants - operators, insurers and government - to identify the insurance framework to support the changes required by the Paris Convention and find solutions to meet changes to 'heads of damage' and increased liability.
"The civil nuclear industry has required the highest levels of collaboration between nuclear operators, insurers and government since the 1950s, but the arrangements relating to the revised Paris Convention are among the biggest triumphs in that trilateral relationship. Crucially, with COP26 around the corner, this outcome provides the firm foundation for the sector to grow and play its vital role in supporting the net zero transition," he said.
NRI will now be able to provide cover for all the new heads of damage identified by the revised Paris Convention, including an increased operator's liability limit of EUR700 million initially, building to EUR1.2 billion in a 5-year period; plus additional costs; nuclear damage relating to loss of life, personal injury, preventive measures, economic loss and the identified environmental impacts. Limit increases will also take place simultaneously in the other Contracting Party Countries to the Paris Convention.
Nuclear operators are liable for any damage caused by them, regardless of fault, and are generally required to take out insurance for third party liability. Liability is limited by both international conventions and by national legislation, so that beyond the limit (normally covered by insurance) the state can accept responsibility as insurer of last resort, as in all other aspects of industrial society. Three international conventions - the Paris/Brussels Conventions, the Vienna Convention and the Convention on Supplementary Compensation - currently provide the foundations for the nuclear liability arrangements, which limit nuclear liability both in terms of time and amount.
The protocols amending the Convention on Third Party Liability in the Field of Nuclear Energy (the Paris Convention) aim to improve the nuclear liability regime by, amongst other things, increasing the amount of compensation available, extending compensation for nuclear damage to a larger category of victims, broadening the range of damage subject to compensation and extending the prescription period for loss of life or bodily injury.
NRI said that after "intensive consultation and review" it has concluded with the UK government that it is "not yet commercially viable" for the private insurance market to cover a discovery period for bodily injury claims beyond 10 years. Discussions and work with the civil nuclear sector and government to agree the best long-term allocation and sharing of this complex risk are to continue, it said. The UK government "has recognised NRI's position and will proceed with a government indemnity for the additional risk, whilst NRI continues to develop satisfactory coverage options going forward".
"With COP26 just a few weeks away, these arrangements are critical to enabling the nuclear industry to grow and support increases in demand for low-carbon electricity, such as from the electrification of transport," NRI said. "With the replacement of fossil fuel power generation with more renewable, but intermittent, power sources like wind and solar, nuclear is crucial to provide reliable baseload power. This is made ever more apparent with the current pricing volatility shown in the markets for gas and the need for a stable, secure domestic power capability. Resilience and security of supply for a nation cannot be outsourced. Nuclear insurance ensures the statutory liability limits set by international conventions and national laws can be met, thus providing the social licence that allows nuclear sites to operate, to power our homes, cars and industry of the future, with stable, low carbon, competitive energy."
Insurance pools such as NRI enable a number of insurers jointly to underwrite a technically challenging type of risk. They are typically formed when a risk is high in severity but low in frequency. Over 300 companies in 31 countries currently pool their net capacity in this way to insure domestic civil risks, further diversifying that risk through an interpool reinsurance.
NRI is commonly known as the British nuclear insurance pool and has a membership of 29 UK-domiciled insurers, whose capacity it uses to insure nuclear sites in the UK and reciprocally to reinsure other nuclear sites around the world.
Researched and written by World Nuclear News