The European Commission and Possible Reforms to Nuclear Third-Party Liability Insurance

Prospect Groupexperts have recently contributed to a study completed for the European Commissionon nuclear third-party liability (NTPL) insurance. The EC’s interest in morework on this topic was driven by the following factors:

Despite these difficulties with the provision of nuclear insurance, insurers can meet much larger loss amounts for other events that cause widespread damage to businesses and homes, such as natural catastrophes, for which claims totalling more than $50 billion per event are now quite frequently paid. With other events easily able to call upon such sizeable amounts, the EC commissioned this latest study to discover whether insurers could provide substantially more insurance for severe nuclear accidents, and if so, under what conditions.

The previous EC work on this subject revealed some interest from certain insurers in providing materially higher insurance amounts for catastrophic nuclear losses, but with this insurance cover activated by a trigger of some sort. Of course, at present using a trigger to activate a nuclear site operator’s required financial security for NTPL compensation is not permissible – the funds must be available for all nuclear damage, no matter how it arises.

However, if triggers are combined with other mechanisms or if new capacity is used to supplement the existing financial security requirements, could governments (and ultimately taxpayers), as the payers of last resort, be moved further away from the cost of a severe nuclear accident? The EC thinks the subject is worthy of further study, which is timely as the gradual merging of the capital and insurance markets is opening up new sources of capital and new ways of looking at risk.

In addition,the EC feels that it has made progress on other fronts that could haverelevance to the field of nuclear liability. For example, in the EC’s view significantenhancements have been introduced to the EU legal framework, with the adoptionof the revised Nuclear Safety directive and the revised Basic Safety Standards(BSS) directive; in particular, the revised BSS directive lays down uniformdose limits covering public exposures and occupational exposures and requiresEU members to ensure that reference levels for emergency and existing exposuresituations are established.

Will thesechanges permit greater EC intervention in the field of nuclear liability and willmarket developments encourage insurers to commit higher insurance capacity tonuclear liability? To find out, the EC commissionedthe study to assess the latest structure and capacity of the insurance andfinancial markets in the nuclear third party liability arena, with a view to evaluatinghow and to what extent these private market providers could increase cover in theevent of severe nuclear accident.

Two future blogs will follow the EC study, examining firstly the current state of the NTPL insurance market and then possible mechanisms that might see more private capital and insurance backing NTPL financial security amounts.

About the Author

Prospect Law is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, surveyors and finance experts.

This article remains the copyright property of Prospect Law Ltd and Prospect Advisory Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law and Prospect Advisory.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.

For more information or assistance with a particular query, please in the first instance contact Adam Mikula on 020 7947 5354 or by email on adm@prospectlaw.co.uk.

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Prospect is a multi-disciplinary practice with specialist expertise in the energy and environmental sectors with particular experience in the low carbon energy sector. The firm is made up of lawyers, engineers, insurance and risk management specialists, and finance experts.

This article remains the copyright property of Prospect Law Ltd and neither the article nor any part of it may be published or copied without the prior written permission of the directors of Prospect Law.

This article is not intended to constitute legal or other professional advice and it should not be relied on in any way.