First nuclear pools were founded in mid-fifties of the 20th Century. The process was tightly connected with the beginning of nuclear industry – strictly speaking with the beginning of private nuclear industry with peaceful utilisation of nuclear energy.

In insurance business the word “pool” is commonly understood as voluntary association of insurance companies providing capacity needed for insurance / reinsurance of a certain (usually non-standard) risk.

Reasons for establishing nuclear pools:

Unknown and possibly catastrophic risk – unsuitable for insurance on individual basis;

Small number of insured risks (less than 500 industrial nuclear reactors in the world today, while not all of these reactors are insured/reinsured) – Insurance portfolio is insufficient, unbalanced, not legitimising foundation of individual and specialized departments in insurance companies;

Sums insured in respect of third party liability and material damage losses are of such an extent that a maximum support of the whole national insurance market is needed;

The catastrophic nature of risks would expose individual insurers to unknown or undesirable accumulations, if usual reinsurance and retrocession contracts were used;

The possibility of mutually advantageous exchange of reinsurance business among nuclear pools provides access to capacities of all participating national nuclear markets;

Allowing participation of all insurers active on a national insurance market, which would be otherwise not able or willing to participate in this area of business for several financial, technical or personnel reasons.

Basic principles of nuclear pools’ activities

All risks accepted are covered by net retention of individual pool members (insurance capacity). The risks may not be further individually reinsured;

Reinsurance is arranged among pools and is therefore transparent and maximally protected against unknown accumulation of risks;

Reinsurance among pools is direct (without using any intermediaries), therefore the cost of reinsurance is minimal.

US Framework

The USA takes a somewhat different approach, and having pioneered the concept is not party to any international nuclear liability convention. The Price Anderson Act – the world’s first comprehensive nuclear liability law – has since 1957 been central to addressing the question of liability for nuclear accident. It now provides $10 billion in cover without cost to the public or government and without fault needing to be proven.

American Nuclear Insurers (ANI) is a joint underwriting association created by some of the largest insurance companies in the United States. Their purpose is to pool the financial assets pledged by member companies to provide the significant amount of property and liability insurance required for nuclear power plants and related facilities throughout the world.

ANI’s members include many of the largest insurance companies in the United States. In addition, through quota-share reinsurance agreements with foreign nuclear insurance pools and mutual insurers around the world, they offer insureds substantial levels of insurance protection.

ANI insures a broad array of nuclear facilities and suppliers of products and services to such facilities. The risks insured are associated with the nuclear fuel cycle, and include:

Nuclear power plants that supply electricity for general consumption
Nuclear test and research reactors used by industry, medicine and academia for scientific investigation and development
Fabricators of nuclear fuel for use in nuclear reactors
Low-level nuclear waste management and disposal facilities
Shippers and transporters of nuclear material
Suppliers of nuclear-related products and services

It was renewed for 20 years in mid 2005, with strong bipartisan support, and requires individual operators to be responsible for two layers of insurance cove. The first layer is where each nuclear site is required to purchase US$ 300 million liability cover which is provided by two private insurance pools. This is financial liability, not legal liability as in European liability conventions.

The second layer is jointly provided by all US reactor operators. It is funded through retrospective payments if required of up to $112 million per reactor per accident (plus up to 5% if required for legal costs) collected in annual installments of $17.5 million (and adjusted with inflation). Combined, the total provision comes to over $10 billion paid for by the utilities. (The Department of Energy also provides $10 billion for its nuclear activities.) Beyond this cover and irrespective of fault, Congress, as insurer of last resort, must decide how compensation is provided in the event of a major accident.

More than $200 million has been paid by US insurance pools in claims and costs of litigation since the Price- Anderson Act came into effect, all of it by the insurance pools. Of this amount, some $71 million related to litigation following the 1979 accident at Three Mile Island.

The Nuclear Regulatory Commission (NRC) requires all licensees for nuclear power plants to show proof that they have the primary and secondary insurance coverage mandated by the Price-Anderson Act. Licensees obtain their primary insurance through American Nuclear Insurers. Licensees also sign an agreement with NRC to keep the insurance in effect. American Nuclear Insurers also has a contractual agreement with each of the licensees to collect the retrospective premiums if these payments become necessary. A certified copy of this agreement, which is called a bond for payment of retrospective premiums, is provided to NRC as proof of secondary insurance. It obligates the licensee to pay the retrospective premiums to American Nuclear Insurers if required.

The average annual premium for a single-unit reactor site is $400,000. The premium for a second or third reactor at the same site is discounted to reflect a sharing of limits.

UK FRAMEWORK

NRI is a FSA authorised insurance intermediary that acts as the UK insurance market’s underwriting agent for all matters of nuclear insurance.

It operates as a limited company and has a membership consisting of over 20 leading UK market property & casualty insurers from both Lloyd’s and the general market, who pool their insurance capacity for nuclear risks into NRI; it is therefore commonly known as the British nuclear insurance pool.

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