Now that there are plans to build many new nuclear power plants around the world, including in many countries which do not currently host power reactors, the question has come up about what would happen should there be a severe accident, impacting both inhabitants of the country concerned but also, potentially, neighbouring territories. This brings into question the existing regimes for nuclear liability and the corresponding insurance requirements. These vary country by country and must be adapted by new countries to meet the need.
Governments have generally recognised the need to balance the benefits to society of a developed nuclear industry with protecting the public from the particular risks arising from nuclear energy production. Today, virtually all activities involved in the nuclear fuel cycle are subject to national and international legal frameworks to some degree. At the national level, a legal framework is normally founded on legislation (including regulations), while at the international level it is comprised of one or more legally binding international instruments such as treaties, conventions and agreements.
Although the international nuclear community was well aware of the trans-boundary impact that a nuclear accident could have on human health, property and the environment, it was the Chernobyl accident which triggered the subsequent adoption of international treaties and conventions to specifically address the safety of nuclear power plants, the safe management of spent nuclear fuel and radioactive waste, nuclear emergency notification and assistance, improved compensation for nuclear damage and the international transport of radioactive materials. Similarly, terrorist or other criminal activities at the international level have motivated the international community to adopt new or strengthened legal instruments designed to improve nuclear security, the safety of nuclear trade and the non-proliferation of nuclear weapons.
Yet long before the Chernobyl accident, countries recognised that the consequences of a nuclear accident would not stop at political or geographical borders. They agreed that international conventions would be desirable to ensure that claimants in countries party to it would have their actions judged by similar laws, regardless of where the accident took place or where the damage was suffered. International conventions could also lay down rules for cross-border legal actions, establish liability for damage arising from the transport of nuclear substances from one country to another, and determine which country’s courts should have jurisdiction to hear claims and which country’s laws should apply.
With the predicted increase in the number of nuclear power plants worldwide in the coming decades, the international community must be prepared to adapt the existing international legal framework to those new realities. Perhaps the most important challenge will be to ensure that countries with new nuclear power programmes adhere to the treaties, conventions, agreements and resolutions that comprise that framework and abide by their terms. The same challenge will apply in respect of countries with established nuclear programmes which have chosen not to harmonise their regimes with the international framework.
Countries introducing a new nuclear power programme may adopt whatever legal framework they wish, but the international nuclear community will have a legitimate interest in ensuring that they at least meet minimum requirements. Legislative assistance programmes should be fully utilised for this purpose to ensure the adoption of frameworks that merit the endorsement of that community.
Countries are often reluctant to assume legal commitments, including enforcement measures, preferring non-binding codes and standards over treaty obligations, particularly since the former can be adopted, revised and revoked without lengthy implementation procedures. Yet this might not be enough. Nuclear materials and technology will continue to spread globally and it is unlikely that political “peer pressure” will prove to be a reliable enforcement measure for responsible use in all cases. While it may be attractive to some, to others it will exacerbate concerns about the safe exploitation of nuclear technology in politically less stable regions.
The full potential of existing instruments must be tapped before attempting to establish new ones. In the field of liability and compensation for nuclear damage, for example, there are eight international instruments, starting with the Vienna and Paris Conventions. All have benefits and drawbacks and countries must determine which, if any, best suits their political, economic, geographic and social needs. Given the renewed interest in nuclear energy production, it is maybe remarkable that only 234 of the 436 nuclear power plants in operation are covered by any international liability and compensation regime. Thus it is not a matter of negotiating new instruments but of attracting adherence to existing ones.
In practice, operators of nuclear power plants are liable for any damage caused by them, regardless of fault. They therefore normally take out insurance, and in most countries they are required to do so. 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.
Ever since the first commercial nuclear power reactors were built, there has been concern about the possible effects of a severe nuclear accident, coupled with the question of who would be liable. This concern was based on the supposition that even with reactor designs licensable in the West, a cooling failure causing the core to melt would result in major consequences akin to those of the Chernobyl disaster. Experience over five decades has shown this fear to be exaggerated, and the local impact of a severe accident or terrorist attack is likely to be small – the Three Mile Island accident in 1979 being indicative.
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“Only 234 of the 436 nuclear power plants in operation are covered by any international liability and compensation regime” |
The international nuclear liability conventions contain principles, such as strict liability of the nuclear operator (relieving the victim from proving fault), exclusive liability of the operator of a nuclear installation (legal channeling of liability, regardless of the accident’s cause), limitation of liability in amount and in time and mandatory financial coverage of the operator’s liability (the operator must maintain insurance covering its liability).
Those states which are not party to the international conventions take different approaches. The United States is in this position and 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 accidents. It now provides $10b in cover without cost to the public or government and without fault needing to be proven. It covers power reactors, research reactors and all other nuclear facilities.
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 cover. The first layer is where each nuclear site is required to purchase $300m liability cover which is provided by two private insurance pools. The second layer is jointly provided by all US reactor operators. It is funded through retrospective payments if required of up to $112m per reactor per accident collected in annual instalments of $17.5m (and adjusted with inflation). Combined, the total provision comes to over $10b paid for by the utilities. The Department of Energy also provides $10b for its own nuclear facilities and activities. Beyond this cover and irrespective of fault, the US Congress, as insurer of last resort, must decide how compensation is provided in the event of a major accident.
More than $200m 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.
American Nuclear Insurers is a pool comprised of investor-owned stock insurance companies. About half of the pool’s total liability capacity comes from foreign sources such as Lloyd’s of London. 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. The nuclear operators’ mutual arrangement is Nuclear Electric Insurance Limited (NEIL) which is well funded (a $5b surplus) and cooperates closely with the American Nuclear Insurers pool. It was founded in 1980 and insures operators for any costs associated with property damage, decontamination and related nuclear risks.
The Price Anderson Act has been represented as a subsidy to the US nuclear industry. If considered thus, the value of the subsidy is the difference between the premium for full coverage and the premium for $10b in coverage. On the basis of data obtained from two studies – one conducted by the Nuclear Regulatory Commission and the other by the Department of Energy – the Congressional Budget Office (CBO) estimated that the subsidy probably amounts to less than 1% of the levelised cost for new nuclear capacity.
In Europe, most countries are party to the Paris and Brussels international nuclear liability conventions. In the United Kingdom, the majority of the necessary insurance is provided by a pool of UK insurers comprising 8 insurance companies and 16 Lloyds syndicates, called Nuclear Risk Insurers. The national nuclear insurance pool approach was particularly developed in the UK in 1956 as a way of marshalling insurance capacity for the possibility of severe accidents. Other national pools that followed were developed on the UK model.
In mainland Europe, individual countries have legislation in line with the international conventions and where set, cap levels vary. Germany has unlimited operator liability and requires €2.5b ($3.4b) security which must be provided by the operator for each plant. This security is partly covered by insurance, to €256m ($347m). Switzerland (which has signed but not yet ratified the international conventions) requires operators to insure to €600m ($800m). It is proposed to increase this to €1.1b ($1.5b) and ratify the Paris and Brussels conventions.
Doubts are sometimes expressed that new nuclear power stations around the world are very risky and will not be insurable. This is unlikely, as wherever they are available to private sector insurers, Western-designed nuclear installations are sought-after business because of their high engineering and risk management standards. This will also apply to new nuclear countries. Provided that they carry out their programmes as advised by the International Atomic Energy Agency, developing the important institutional and legal infrastructure, there are no reasons to believe that nuclear liability and insurance requirements will act as any kind of barrier.
Author Info:
Steve Kidd is Director of Strategy & Research at the World Nuclear Association, where he has worked since 1995 (when it was the Uranium Institute). Any views expressed are not necessarily those of the World Nuclear Association and/or its members
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