Tuesday, 2 September 2008

Insuring a nuclear renaissance

By nature insurers take a dispassionate, objective perspective when assessing the convergence of risk and consequence. Insurance related developments can therefore serve as a broad industry touchstone – in this case the future of worldwide commercial nuclear power deployment.

Lloyd’s has included a feature in their current issue of Market Magazine. In this article they begin by acknowledging that “The global nuclear industry’s star is rising”. An example of interest being:

“China, which connected its first commercial reactor to its national grid in 1991, now has 11 working reactors and six under construction. It plans a six-fold increase in nuclear capacity by 2020 and then a further three- to four-fold increase by 2030.”
Michael Dawson, Active Underwriter of Chaucer’s Nuclear Syndicate projects most nuclear new-build will simply replace current facilities nearing the end of their design life and that nuclear’s share of energy in developed countries will remain at about 20% until around 2025. Dawson predicts total ‘nuclear business’ to subsequently increase after 2025.

Interestingly for Australia, fuel security is highlighted as a risk whose management is critical to the global expansion of nuclear power. This is consistent with international efforts and attention being given to fuel supply such as the GNEP and a special topic of the IAEA’s 50th General Conference approximately two years ago.

The article discusses specific areas of risk such as construction, flooding and a hypothetical release of radioactive material as well as more recent additions such as those related to environmental impacts and decommissioning.

Mark Tetley, Managing Director of the British nuclear pool, Nuclear Risks Insurers concludes, “I’m very positive about the UK’s nuclear new build framework, as I believe it will be the most sophisticated globally. The insurance market is already playing a central role in helping the Government develop this model.”

The magazine includes numerous inserts and factoids. A few of interest are included below.

Lloyd’s has been involved in nuclear insurance since the British nuclear pool, Nuclear Risks Insurers (NRI), was founded in 1956.

NRI’s capacity comes from eight insurance companies and 16 Lloyd’s syndicates. NRI represents the largest single block of risk transfer insurance capacity in the world, at more than £400m. It also reinsures other nuclear pools worldwide. It covers risks including property, nuclear fuel and waste plants, construction work on nuclear sites and transport liabilities.

In the UK, the industry is governed by various national laws and international conventions. These set limits of damage beyond which the state is effectively the insurer of last resort.

For details of international nuclear liability conventions from the World Nuclear Association.

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