Study on the insurance, private and financial markets in the field of nuclear third party liability. Final report

In the 1950s, recognising that the possible cross-border consequences of a nuclear accident required an international nuclear liability regime, a special third-party liability regime was developed to cover nuclear sites. Today three Conventions (the Paris/Brussels Conventions, the Vienna Convention and the Convention on Supplementary Compensation – CSC) share similar principles and provide the foundations for the nuclear liability arrangements. Nuclear liability is limited in time and amount by these international Conventions and by national legislation that largely follows the principles established by the Conventions, so that beyond the financial security limits imposed on nuclear operators, the state can accept responsibility as insurer of last resort, as in many other aspects of industrial society. The nuclear site operators are liable for any and all nuclear damage caused by them, regardless of fault. They therefore normally take out insurance for this nuclear third-party liability (NTPL); in most countries they are required to do so. The 1992 United Nations Conference on Environment and Development (UNCED) in Rio de Janeiro (the Earth Summit) witnessed the unveiling of the Rio Declaration1, a short document that laid out guiding principles for global sustainable development; among the 27 principles are two of particular relevance to the nuclear sector. Principles 13 affirms ‘states shall develop national law regarding liability and compensation for the victims of pollution and other environmental damage’ and principle 16 states that ‘national authorities should endeavour to promote the internalisation of environmental costs and the use of economic instruments, taking into account the approach that the polluter should, in principle, bear the cost of pollution’. Although the main nuclear liability Conventions pre-dated this Earth Summit by decades, the major nuclear accident at Fukushima in 2011 and those prior to the Rio Declaration demonstrated that the nuclear liability regimes in place at the time fell short when measured against these principles; in both cases the polluters may not have borne the full cost of the pollution caused and the regimes provided only limited compensation amounts for victims. A principal reason for the limited compensation following the above noted major nuclear incidents was the lack of adequate insurance capacity to cover the full scope of the site operators’ financial security requirements; the broadening of the coverage demanded by the revised nuclear liability Conventions2 presents traditional insurers with difficulties, as the new cover requirements apparently push at the boundaries of insurability even more. This study is focused on nuclear third-party liability and it was commissioned to investigate ways of i) closing the insurability gaps, where the full financial security amount is not attainable because of a lack of capacity for the full scope of cover required and ii) developing additional capacity, in order to increase private coverage for NTPL in case of a severe nuclear accident. The study researches the state of the nuclear liability insurance market today, analyses the insurers’ difficulties with the revisions to the nuclear liability Conventions and proposes new solutions to encourage the deployment of more nuclear liability capacity (including for the full scope of the liability). The study has five main objectives: A. Provide a description of the different providers of nuclear third-party liability (NTPL) insurance which operate in the EU; B. Provide an estimate of the NTPL insurance capacity available at the global and EU level and identify the factors that constrain the availability of this capacity; C. Identify the currents gaps in the provision of NTPL insurance as well as possible private sector solutions to cover these gaps; D. Provide an estimate of NTPL insurance capacity to provide for increased coverage and identify possible solutions to be set up for that purpose; E. Assess the main impacts of the different solutions and mechanisms identified and indicate which solutions would be more effective for covering the gaps of the insurance