All risks of physical loss or damage on all aspects of the nuclear fuel cycle are underwritten at Lloyd’s.
Lloyd’s insurers are set to stand behind the UK’s recently announced new generation of nuclear power stations. All risks of physical loss or damage – first and third-party – on all aspects of the nuclear fuel cycle, from mining uranium ore to the processing of nuclear waste are underwritten at Lloyd’s.
The new era of nuclear energy supply for the UK comes as the Government tries to meet climate change targets by cutting carbon emissions and at the same time cushion the economy against volatile gas and oil supplies.
A Government white paper points to a fleet of up to ten nuclear power stations being built by 2020.
The UK’s nuclear insurance market is centred on Nuclear Risk Insurers Ltd, or the British Nuclear Pool. NRI represents the largest single block of risk transfer insurance capacity in the world, at around £400 million and, founded in 1956, it is also one of the oldest nuclear insurance entities.
An FSA authorised insurance intermediary, NRI acts as the UK insurance market's underwriting agent for all matters of nuclear insurance. It operates as a company limited by guarantee and has a membership consisting of over 20 insurers, with Lloyd's syndicates providing more than three-quarters of its capacity.
The insurers pool their insurance capacity for nuclear risks into NRI, which then uses its capacity both to insure nuclear sites in the UK and reciprocally to reinsure other nuclear sites around the world in association with similar entities internationally.
NRI provides cover for nuclear installations in respect of public liability, and material damage and liability insurance for transport of nuclear matter. A new nuclear plant under construction is not covered by the pool until it becomes ‘nuclear’ – upon the delivery of nuclear fuel to the site or loading of fuel into a reactor – but insurance cover is available for construction risks on operational nuclear sites.
Deployment of the new UK installations is contingent on insurance being available. Mark Tetley, managing director of NRI, says that once the new sites are loaded with nuclear fuel NRI expects to have a significant involvement in the insurance programmes covering them.
Mr Tetley says that the amount of insurance capacity needed depends on how many new reactors are actually built. “It also depends on where they are built and what type is built. But capacity of around US$3-4 billion per reactor will be needed,” he forecasts.
A number of different power companies announced their intention to build nuclear power stations immediately after the Government released its plan. An important provision for the power companies and investors was the Government's decision to cap liabilities for decommissioning and the disposal of waste in ‘extreme circumstances’.
“Shortfalls in decommissioning funding may be available from the insurance market if the shortfall is caused by insurable perils,” Mr Tetley says. “Ultimately, decommissioning itself can be, and is, insured. Insurance is already provided to waste sites.”
The operators can’t take insurance cover for granted, however. Dan Ash-Noble, senior property underwriter for the Catlin Syndicate at Lloyd's stresses that the new installations will not require nuclear insurance for another seven to ten years, and it is impossible at this time to predict market conditions or capacity over that timeframe.
“For example, a lack of confidence in the sector following bad publicity or an instance of poor risk management would be likely to affect the capacity offered by commercial insurers,” Mr Ash-Noble says. “However, as a leading nuclear insurer, we like to see continued investment in the sector and hope to be able to work in partnership with members of the nuclear industry for many years to come.”
