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Who the nuclear insurers are.

In the late 1950's it was unclear how the traditional insurance market could provide adequate capacity for an emerging nuclear industry harboring catastrophic risk potential. The insurance industry's response was to form pools of insurers to make available to the nuclear power utilities as much liability insurance as was then feasible. In 1957, that amount was $60 million. At that time, under the provisions of the Price-Anderson Act. the federal government provided up to $500 million of indemuity for liability in excess of the $60 million in liability insurance made available by the pools. An amendment to the act in 1975 provided for the elimination of gorerument indemnity once the nuclear insurance industry capacity reached $560 million, which it did in 1982. In the event liabilities exceed this capacity, the amendment also called upon the U.S. Congress to take "whatever action is deemed necessary and approprinate to protect the public."

Today, the pools operate under the names American Nuclear Insurers (ANI) and Mutual Atomic Energy Liability Underwriters (MAELU), A third pool, Mutual Atomic Energy Reinsurance Pool (MAERP) was formed as a reinsurer of MAELU policies. Insurance purchased through ANI/MAELU can cover the nuclear liability and first-party property damage exposures of the commercial nuclear industry. Nuclear liability insurance covers the operators of nuclear facilities and their suppliers for liability for bodily injury or property loss to the general public resulting from a release of nuclear material or radioactivity from the facility. For the owners of nuclear power reactor facilities. the pools' first-party property damage insurance includes coverage for radioactive contammation, as well as conventional damage (such as fire). Foreign reinsurers provide over 60 percent of these pools' liability and primary property capacity and over 80 percent of excess property capacity.

In 1992. an average operating power reactor paid approximately $420,000 annually for the $200 million nuclear liability insurance limit issued by ANI/MAELU, whose rates are based upon factors that include size, type and location of the nuclear facility. However, this premium is subject to substantial refunds should there be favorable loss experience for all policyholders over the preceding 10 year period. ANI also reports that the property insurance premium for a single unit nuclear power station averages $1.7 million per year for $500 million of basic primary property insurance. For the pools excess insurance program. an average premium is $1,850, $2,100 or $2,350 per million of limit, for single-, double- and triple-unit sites, respectively. A single-reactor-unit site could expect to pay about $1.4 million to purchase the pools maximum excess limit of $800 million.

Another insurance option open to the utilities is the formation of a group captive. For example, Nuclear Nutual Limited (NML) is a Bermuda-incorporated mutual insurance company owned by 24 (or roughty 50 percent of the) U.S. nuclear utilities NML, which operates through a branch office in Wilmington, Delaware, was formed in 1973 in response to the high cost of nuclear insurance, insuffident insurance capacity to cover the entire asset value of the plant and then-restrictive engineering requirements imposed by the nuclear insurers, it offers no nuclear liability coverage,

At present, NML reports that its policy limit for primary property coverage stands at $500 million, with minimum deductibles starting at $250,000. Along the same lines as NML another group captive (which comprises almost all U.S. nuclear utilities), Nuclear Electric Insurance Limited (NEIL), was established in 1980 to provide excess insurance coverage to its member insureds. A NEIL policy can provide up to $1.325 billion for excess property coverage and decontamination liability, with a $250 million sublimit for decommissioning liability, notes a NEIL representative. Another policy also offered by NEIL is for business interruption and/or extra expense. This policy covers part of the excess cost of replacement power and business interruption losses in the event of a prolonged accidental outage of a nuclear unit. Weekly indemnity payments are made to the insured for up to $3.5 million per week for the 52 weeks following a 21-week outage period. The weekly indemnity amounts go down in increments during the following years up to and including 177 weeks for an outage period. The average annual premium for the maximum $500 million NML policylimit is $1.36 million for a single-unit site and $2.43 million for a multi-unit site. The average deductible, according to NML is $1 million. The average annual premium for a NEIL policy for the maximum limit available is $1,460,000 for a single-unit site and $2,426,000 for a multi-unit site.

While only the state of Oregon mandates that a nuclear facility purchase the maximum amount of property insurance available, the majority of plant operators, acting upon their probabilistic risk assessments. will purchase it anyway, notes David Scott, a vice president of underwriting for NML/NEIL The maximum property coverage available to a single generating station, which is $2,625 billion, can be achieved only by purchasing a combination of policies from the various pools. For example, John Rushmore. manager of risk management for Niagara Mohawk Power Corp. (NiMo) in Syracuse, New York. has NiMo purchase the maximum amount of coverage for its Nine Mile Point 1 & 2 reactors located 40 miles away. NiMo has both primary and secondary property coverage through ANI/MAELU, with a NEIL policy on top for excess property coverage.
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Author:Kurland, Orin M.
Publication:Risk Management
Date:Jun 1, 1993
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