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NUCLEAR RISK: THE INSURANCE PERSPECTIVE (PART III)

This article is published further to the Prospect Group seminar held at the Centre, Birchwood Park, Warrington, on Tuesday 30th April 2019.

Please click here to see the event flyer.

The seminar addressed gaps in the world of nuclear contracts, with a focus on insurance and the gaps to look out for in nuclear contracts and insurance arrangements, as well as the options available to minimise or remove these gaps. This is the final of three sequentially linked papers that summarise the seminar’s content.

This paper will consider some of the more obscure gaps that can occur, some resulting from the radioactive contamination exclusion (RCE) clause found on most non-life insurance policies, which was described in the first of these papers.

Insurance policies for nuclear contractors and operators

  • Normal liability insurance policies (for example directors and officers, or products and professional indemnity policies) purchased by any business will contain an RCE clause. This will exclude any ‘nuclear’ work.
  • Any contractors working on nuclear sites, especially if only occasionally or if nuclear consists of a small part of their work, will need to ensure that nuclear liability is properly allocated.

Claim investigation, defence, management and settlement costs

  • The liability Conventions require operators to have financial security to cover nuclear damage to third parties; these funds cannot be used to cover any costs incurred during or after a nuclear incident that causes damage. The Conventions are also silent on how these costs might be allocated. 
  • Operators, transporters and contractors must consider these costs and their allocation; insurance is available to cover them.

Counterparty Risk

  • The nuclear liability Conventions and national legislation leave nuclear site operators with long-term liabilities. Therefore, the solvency and durability of the financial security provider is an important consideration. 
  • The prevalence of RCE clauses and nuclear insurance complexities can increase counterparty risk.

Seminar Key Points

  • Insurance policy RCEs and interfaces can be the source of many coverage gaps.
  • Most of these and other gaps are avoidable or transferable with analysis, though sometimes at a cost.
  • Scopes of warranties, polices and contracts should all be subject to experienced review, to help minimise any lack of cover.

About the Author

Mark Tetley has wide experience gained from senior positions across the London insurance market as  both an underwriter  and a broker , in a variety of sectors. He provides advice and assistance on a wide range of insurance and risk issues, including comprehensive nuclear liability and property insurance assistance, complex infrastructure project programme design and review, claims and policy reviews, assistance with project insurance design and implementation in developing countries, and many other aspects of risk mitigation.

Prospect Group is an award winning Multi-Disciplinary Practice combining the legal services of Prospect Law with the consultancy services of Prospect Advisory. Our lawyers and technical experts provide a single point of reference for clients involved in energy, infrastructure and other development projects.

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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