In a move hailed as a major step towards enhancing the creation of clean energy, the members of the UK insurance pool for nuclear risks have announced they have expanded its capacity to over €1 billion.
The figure is a sixfold increase in the amount of capacity in the pool since its creation two decades ago.
Nuclear Risk Insurers (NRI), a global leader in nuclear insurance, revealed that 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 January 1, 2022. Capacity will be led by Chaucer, through its syndicate 1176, at Lloyd’s
Mark Popplewell, managing director of NRI, explained: “From the very beginning of discussions, NRI has been the leading voice in trying to identify the right insurance framework to support the changes required by the Paris Convention. An incredible amount of innovation and hard work has been required from all key participants – operators, insurers and government – with the result that solutions have been found 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.”
NRI added after 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 €200 million in 2004 to €1.2 billion today, thus meeting government policy that the nuclear industry increases compensation following a nuclear incident to this level.
The pool is now able to provide cover for all the new heads of damage identified by the revised Paris Convention, including the increased operator’s liability limit of €700 million initially, building to €1.2bn 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 in the other Contracting Party Countries to the Paris Convention simultaneously.
“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,” added NRI. “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.”
There has been ongoing and untense debate around the extension of the prescription and extinction periods (the discovery period following a nuclear incident) for nuclear damage claims from 10 to 30 years for actions in respect of loss of life and personal injury. After consultation and review, NRI explained it has concluded with the government that it is not yet commercially viable for the private insurance market to cover the discovery period for bodily injury claims beyond 10 years.
“Evidence suggests that establishing unknown and unforeseen health impacts of radiation could lead to difficulty and contention, potentially creating complex, lengthy and expensive legal disputes if claims were made, potentially many years after damage is alleged to have occurred,” it added. “While the likelihood of an event at a nuclear power plant and subsequent successful third-party personal injury claim is low, there is very limited data to fully quantify the risk presented.
“After lengthy discussion with the Department for Business, Energy and Industrial Strategy (BEIS), 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.
“NRI has already proposed a trigger clause, based upon a verifiable off-site release of radiation from a nuclear licensed site, as a potential solution to government that would enable the insurance market to cover the majority of the prescription period extension. Without a trigger, the 30-year discovery period mandated locks capital up for many years, making the long period to realise earned premium less attractive for insurers.”