INLA/AIDN Nuclear Inter Jura 2014 Buenos Aires – 20-23 October Mark Tetley Price Forbes & Partners...

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INLA/AIDNNuclear Inter Jura 2014

Buenos Aires – 20-23 October

Mark TetleyPrice Forbes & Partners Ltd

Nuclear insurance: yesterday, today, tomorrow


Nuclear law….?



I. History of nuclear insurance

II. Current topical matters

III. Future improvements


What is insurance?

Risk management options

Retain ControlAvoid Transfer

OthersInsurance

A financial safeguard against the economic consequences

of loss events


A history of nuclear insurance I• Nuclear electricity production caused

difficulties for insurers in the 1950s:Unknown risk.Low frequency for nuclear events.Few insured installations.Unknown, widespread loss accumulation potential. High severity (catastrophe) potential.

“..circumstances may arise which can result in loss of control over an atomic reaction….” 1957 insurers’ report into risks posed by nuclear industry.


A history of nuclear insurance II• Result: nuclear exclusion clause in insurance policies,

to channel liabilities.• First formation of nuclear insurance pools &

development of nuclear liability legislation:– 1954: US - Energy Act (sect.170 1957 Price-

Anderson Act)– 1959: UK - Nuclear Installations (Licensing &

Insurance) Act– 1959: Germany - Atomic Energy Act

• Note that these & others were introduced prior to the 2 major nuclear liability Conventions.


Liability & property insurances

Onsite – assets & cash flowProperty insurance

Offsite – legal obligationsLiability insurance

Fukushima Daiichi, Japan


Nuclear Insurance Pools• Nuclear Insurance pools are open to all insurers:

– Enables participation regardless of insurer’s size– Access to whole market’s knowledge, innovation &

experience– Provides sufficiently resourced claims settlement entity

• Acceptances on net retention basis:– Ensures concentration of nuclear risks in pool

• Reciprocal exchange with other pools:– Enables easy access to full global insurance capacity– Facilitates rapid & easy interchange of information

• Risk transfer - true distress funding


Mutuals & captives• Mutuals:

– Nuclear industry owned insurance entity– Homogeneity of treatment of members– Reliance on reinsurance– Same capital as nuclear industry

• Captives:– Utility owned insurer– Same capital as parent

• Risk retention - better suited for smaller losses rather than catastrophe losses?







Nuclear liability£140m

Nuclear liability£950m£140m

Now New build - 2020

NPP asset valueinsurance£1.4bn

NPP new buildasset valueinsurance

£12-16bn?£1.5bn

£12 – 17bn

Capacity

+ c. 1,000%


New PC requirement: c.$1.5bn minimum

Newheads

of damage 30 years

TIME

Today:10 years

SCOPE OF COVER >>> now + environmental

c.$1.5bn

AMOUNTOF

COVER

$0m

CoverageExtended time to make claim - 30 yrs


Erosion of strict liability

• Suppliers not generally liable, but recourse ‘if…so provided expressly by contract’ (PC Art6 (f))

• Indian NTPL legislation: S.17.• Result:

– Some contractors are being asked to take on limited liability risk.

– More difficult risk exposure accumulation for insurers.


New build exposure

Hinkley C: new build

Hinkley B: operational

Hinkley A: decommissioning

Hinkley Point NPP, UK


Risk management

• Ageing & maintenance: need for investment.• Greater use of contractors: safety culture

compromised?• PLEX & decomm activities: material ‘change of

risk’?• Increase focus on HP assessment & best practice.• New build: skills shortages & brains vs. experience.• However: nuclear still one of the best risks.







Legal harmonisation

• Of c.440 reactors globally, > 230 remain outside of the Conventions.

• Revised Conventions’ greater reference to national ‘competent courts’ & wider geographical scope may lead to greater disharmony.

• Other reviews: e.g. EC - a complication or positive development?

• Is CSC a step towards a harmonised global system?


New markets & higher limitsNuclear Cat Cover

Obligatory liability cover

e.g. $10-15bn cover

exceeding $2.5-5bn

Effect on consumers:appr. 0.1 to 0.2 cents

per Kw/h

Operator financial security(similar to USA)

Full Convention cover (Current insurance

arrangements)

• Insurers can provide much more compensation: e.g. 2005 Hurricane Katrina $72bn. This would relieve taxpayers & public.

• Trigger would be ‘catastrophic’ nuclear loss only e.g. trigger of high radiation readings.

• Cover provided by a mixture of markets; it would not be Convention compliant cover.

• Greater risk transfer to safeguard operator’s position.

• More internalisation = better image?


Claims & accident management

• Need to have full system in place before anything happens.

• Easy, practical operation for public using all media channels.

• Opportunity: ‘shop window’ for nuclear industry & nuclear insurance market.

• Damage rectification: safe vs. desirable.

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EC3R 7PDUnited Kingdom

T: +44 (0)20 7204 8400E: [email protected]

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Prepared by Price Forbes & Partners Limited2 Minster Court, Mincing Lane, London EC3R 7PD

© Copyright Price Forbes & Partners Limited 2014Registered in England number 5734247. Registered office as above

Price Forbes & Partners Ltd is a Lloyd’s broker and is authorised and regulated by the Financial Conduct Authority

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. There

can be no guarantee that information herein is accurate as of the date it is received or that it will continue to be accurate in the future. No one should

act on such information without appropriate professional advice after a thorough examination of the particular situation

Questions?

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INLA/AIDN Nuclear Inter Jura 2014 Buenos Aires – 20-23 October Mark Tetley Price Forbes & Partners...

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