How is nuclear energy liability insurance structured?……….
While structuring insurance for nuclear reactors, the only factor which ought to be considered is the high potential perils associated with installation and operations of nuclear fission and fusion. This drastically differs from the risk associated to that of other industries of global sectors. The fundamentals of any nuclear liability insurance are:
I. Channelling of liability on the operators: The nuclear operators are liable for all damages caused by a nuclear incident notwithstanding fault liability.
II. Trans-border nationality: A nuclear energy disaster affects not only the country in which it is located but the surrounding states as well. Hence, national laws are augmented with international conventions which are needed to defend the cross-border inflictions of such disasters.
III. Limited liability: Limited civil liability concept has been incorporated by the international conventions on the basis which the national laws have been formulated, putting a maximum cap limit on the nuclear operators, beyond which the state will take up the liability.
(Detailed explanation is provided in the latter part of this article)
Due to such high-risk and strict liability, the nuclear operators opt for third-party civil liability insurance which finds its root in either of the two forms:
I. National Insurance Pool:
To cover the potential liability of the nuclear industry, many insurers agreed to pool their resources for the associated high-potential risks. A pool is where a group of insurance companies jointly participate to a fixed percentage in the insurance of a particular risk or class of business. These are created in the circumstances involving risks which, in practicality, cannot be provided by any individual insurer on a stand-alone basis. In most countries, national insurance pools have been formed based on the requirements laid down by the federal laws (based on international conventions), pooling together insurance for the domestic nuclear operators.II. Mutual Insurance Associations: The USA (the Nuclear Electric Insurance Limited) and Europe (the European Mutual Insurance for Nuclear Installations) have insurance associations which deal with the physical damage and liability in the event of a nuclear accident which is set up by the nuclear industry itself.
Principles or fundamentals governing Nuclear Liability Insurance:
In recognition of this exposure caused by nuclear accidents, the international conventions and nuclear liability insurance were formulated in the light of the seven fundamental principles:
I. Strict Liability:
The operator is directly and strictly liable for the damage caused by the nuclear incident. The aggrieved need not prove that the operator was negligent or at fault. Only the link between the damage caused and the nuclear incident needs to be demonstrated. The operator is liable for any damage resulting from a nuclear event at his installation, in principle irrespective of its cause.
II. Channelling liability to the operator (Exclusive liability):
All liability arising from the damage caused by a nuclear accident is channelled to the operator, thereby protecting the rights of the public. The operator is exclusively liable for damage resulting from a nuclear incident. He is held liable to the exclusion of any other person, regardless of who caused the damage. Hence, the damage is charged to the operator himself and not the suppliers. The channeling of liability might seem unfair as it means that the operator could be liable even if a third party were negligent or at fault. The victim of a nuclear incident can only present his claim to the operator of the installation causing damage or his insurer. Furthermore, such exclusive liability brings certainty in insurance claims as the compensation settlements would be quick, and avoids costly and time-consuming claim procedures. Had the situation been otherwise, then insurers would have to hold separate pools or covers for every party involved in the nuclear reactor chain.
III. Limitation of liability in Time:
This is an important concept because the injury caused by a nuclear incident may not manifest for several years. Ergo, a limitation period is intended to help the claimant where the consequences may not reveal for several years; thereby not divulging them of their right to seek damage, and at the same time it protects the rights of the operators and insurers by not exposing them of liability for an indefinite period. For example, in the UK, the Nuclear Installations Act 1965 states that any claim made after 10 years (from the date of occurrence of the nuclear incident) but less than 30 years, will be made directly to the government instead of the insurer or the operator.
IV. Limitation of Liability in Time:
The amount of liability charged to an operator under the principle of strict and exclusive liability is capped to a limit to shelter them from the full risk amount. This concept is introduced to bring a balance or quid pro quo status against the strict and exclusive liability. Beyond the limit, the state covers the liability amount.
V. Insurance or other _nancial security:
Operators are obligated to carry financial security to cover their potential liability amount in the event of a nuclear incident. Usually, insurance pools tend to third-party claims. However, in certain situations, operators take the liability on themselves and cover the same by providing financial security in the form of government guarantees, bank guarantees, letters of credit, mutual fund, operators’ pooling etc.
VI. Jurisdiction:
Jurisdiction over claim actions lies exclusively with the courts of the country where the nuclear incident occurred. The courts of other contracting states will not be competent to hear the claims. Judgements made by the competent court will be recognized and enforced in other contracting countries. This principle is only useful when many states have ratified either the same convention or a bridging convention. Victims may, on first impressions, see it as an advantage to be entitled to sue all possible parties in different courts for nuclear damage. However, it is pertinent in the victims’ best interest to disburse compensation equitably.
VII. Applicable Law:
The applicable law is the national law of the competent court that has jurisdiction. The federal law must also be applied without discrimination on the grounds of nationality, domicile and residence. The applicable law principle helps prevent costly and lengthy arguments about which law applies, especially with regard to the complexities of the national and international rules surrounding the conflict of laws.
International Conventions:
A nuclear accident causing trans-boundary damage has led to the development of international conventions to ensure that victims have a readily available justice system.
I. Paris Convention:
The nuclear industries liability regime was founded in 1960 by the OECD’s Paris Convention. Which requires national legislation to be passed for it to be ratified. Although this convention recognizes strict and exclusive channeling of liability, it specifies certain exceptions, which rebuff the liability of the operator. Following are the exceptions: …………
http://www.mondaq.com/x/781188/Insurance/Global+Nuclear+Liability+Insurance+and+Claims
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