David Way says cover for new nuclear plants is simple – until the fuel goes in
The government recently said yes to a new generation of nuclear power stations and outlined its aim to speed up the construction of plants. It will be some time before insurers cover these risks in the UK, but they represent a great opportunity and a big chunk of premium coming into the market.
Insurers are likely to play a significant role providing cover for new nuclear builds and smoothing the way for any bank financing of these constructions. In reality, providing cover for the building of nuclear stations is quite easy – until the point nuclear fuel goes into them! It then becomes more complicated.
While this may seem a forbiddingly technical arena, nuclear insurance is
not really so complicated – and the UK insurance market still retains the expertise and capacity to cope with all manner of risks, despite the past 15 years of stagnation in nuclear plant growth.
Before the nuclear fuel is introduced, the conventional insurance market covers risks through a contractors all risk policy. This typically will be arranged in the London/international insurance markets by leaders including Ace, AIG, Aegis, XL, Swiss Re and Royal & SunAlliance.
Other specialist underwriters will follow these recognised leaders, and one or more of the top four or five brokers will undoubtedly play a major role.
But, it is important to remember that nuclear plants are just one part of a mix of power generation facilities; nuclear currently represents 20% of power generation in this country (a figure now set to rise) compared to 80% in France.
“The UKâ€ˆinsurance market retains the expertise and
capacity to cope with all manner of risks, despite the
past 15 years of stagnation in nuclear plant growth
The insurance for projects such as these would be owner-controlled (by a company like EDF Energy or E.ON) but would include the insurance interests of other third parties, such as the banks and contractors.
There may be a need for professional indemnity cover for any errors that engineers may make in their design or supervision. This is a specialist area in which the insurance adviser must have the highest skills and reputation.
Meanwhile, liability insurance for nuclear plants is governed by international conventions (such as the Paris Convention), which require nuclear facilities to be insured for a minimum amount, currently being increased to €700m.
When nuclear fuel is introduced, the plant’s cover switches to typical nuclear insurance arranged with the UK pool – nuclear risk insurers (NRI) which many insurance companies subscribe to.
Other countries have their own version. Finally, terrorism insurance would be arranged through Pool Re, a company owned by all the UK insurers but backed by the government as the reinsurer of last resort.
But that’s another story.