While Pool Re has extended cover to include a terrorist attack on a nuclear site, there is still unease over the issue of liability. R T Houseago reports
The changes to the operation of Pool Re terrorism reinsurance cover, which came into effect on 1 January 2003, will be welcomed by those trying to cope with the increased uncertainty and heightened risk of terrorism. Broadly speaking, the changes operate by making Pool Re cover available on an "all risks" basis rather than the previous restriction - property damage by fire and explosion. They even go so far as to extend cover to the results of the setting off of a nuclear device by terrorists. Commercially, an initiative has been taken to reintroduce competition into the terrorist cover market by a phased increase in retentions over the next four years. New commercial reinsurance should appear or the direct market will take on the retention. Well that is the plan anyway.But the welcome changes to the Pool Re scheme only go so far. What would be the outcome in the case of nuclear installations where the threat of immediate catastrophic damage is accompanied by possible long-term effects? The full potential of the damage may not be fully understood. The Pool Re scheme remains one addressed on a first party basis to physical damage to commercial property and consequent business interruption flowing from that damage. There are 15 nuclear power stations dotted around the UK and the nuclear fuel reprocessing plant at Sellafield. All naturally feature on the critical national infrastructure list.The threat may not be specific in the UK, but certainly in both Australia and Finland in recent times more specific perceived threats have been noted and it has been widely reported that the French now have anti-aircraft missiles protecting their own nuclear sites. So, in the event of the worst actually happening, what is the framework of resulting liabilities that might be faced by the operating authorities which hold UK nuclear site licences? What ultimate protection might there be, according to such liabilities, to those still unprotected by first party cover?The scope of potential financial loss is truly staggering. The Chernobyl incident was the most expensive industrial accident in modern history and the lowest realistic estimate of total losses was in excess of $6bn (£3.7bn) in 1991 and still rising. The much smaller Three Mile Island incident involved a far less catastrophic event, but is still estimated to have generated losses of $4bn (£2.5bn). The starting point for considering legal liabilities is the 1960 Paris Convention on third party liability in the field of nuclear energy, in accordance with the principles of which there is in England and Wales the Nuclear Installations Act . This provides a comprehensive code, limiting and regulating the liability of nuclear site operators for events on-site, and to an extent off-site, for example accidents in transit. The main principle enshrined in statute is that the operator of the nuclear site is absolutely liable for personal injury and damage to property caused by a nuclear incident. This is strict liability in English law, so that all that is required is proof of cause and then the operator is liable, irrespective of personal fault. The site operator's strict liability exists subject to certain financial limits that are currently set, that is, the operator is potentially liable for about the first £140m of damage. Above that, the state is required to assume liability for the consequences of any nuclear incident. Liability, if any, is focused on the site operator; anyone else is excluded by statute.Section 7 of the 1965 Act is the main statutory provision that gives rise to the strict liability of the site operator without fault, and extends that liability to encompass any nuclear incident involving nuclear material in transit on behalf of the site operator, or which has at any time been on the operator's site.If claims are brought following a nuclear incident, which in the aggregate exceed £140m then the government has to top-up funds to a minimum level of around £260m. But thereafter, any further top-up payments are a matter of discretion only for the government and there is no right to compensation above the ceiling of £260m. Claims against the operator must be made within ten years of the nuclear incident and all claims must be made within 30 years, so that claims between years ten and 30 must be made directly to the Energy Secretary.Against this background there are a number of issues on which attention has tended to focus as part of the renewed debate spurred by 11 September, but four are particularly important.
Nightmare scenarioScientists for Global Responsibility have repeated a model based upon a plane strike on the Sellafield siteThis suggests that the potential release of Caesium-137 would generate a 200km immediate exclusion zone with a 700km downwind exclusion zone.This is far more than the zones involved around Chernobyl, but is based on the notional release of just half of the Caesium-137 stored at any time at Sellafield. The spectre is that much of central England and, possibly, areas of other European countries, being rendered uninhabitable for much of the following century.