Nuclear Energy, Long Tail Insurance Liabilities

1. 39 ESSEX CHAMBERS
ENERGY CONFERENCE 2015
NUCLEAR ENERGY: LONG-TAIL LIABILITIES
Jonathan Bellamy

2. Statutory Liabilities
Present: Nuclear Installations Act 1965 (NIA)
• Damage to third party property
• Personal injury (10 years)
Future: NIA -Nuclear Installations (Liability for Damage) Order (draft)
• Economic loss from personal injury or damage to third party property
• Loss of income from direct economic interest in use of environment
• Cost of measures of reinstatement of impaired environment
• Cost of preventative measures
• Personal injury (30 years)

3. Limits of time and liability
Present extinction period:
• Damage to third party property and personal injury (30 years)
Future extinction period:
• Personal injury (30 years)
• Other heads of nuclear damage (10 years)
Present
• Standard site: £140m
• “Prescribed” low risk site: £10m
• Future
• Standard site: €700m - €1,200m (+5 years)
• “Prescribed” low risk site: €70m
• Intermediate site: TBA

4. Parties affected (1)
• Claimants
• Licensed operators: site, disposal site, transit
– Channelization
– Strict liability: duty to ensure no occurrence causes breach of
duty or “grave and imminent threat” of breach of duty
– Contractual right of recourse:
Draft NIA S12(1E): “No liability other than that imposed by [S12]
may be incurred by any person in respect of injury, damage or
significant impairment to the environment caused in breach of a
duty imposed by” S7-10
(Paris Convention: incl. 2004 Protocol – Art 6(f)(ii): “The operator
shall have a right of recourse only.. (b) if and to the extent that it
is so provided expressly by contract”

5. Parties affected (2)
• Suppliers
– Plant ; e.g. EPC contracts
– Service contractors; construction, operation, decommissioning
• Insurers & reinsurers
– Underwriting issues
• V. Limited claims data; esp. environmental remediation
• Theoretical data modelling c.f. claims experience
• Losses infrequent but potentially catastrophic
– Security and solvency of private sector insurers
• Government
– PI 10-30 claims
– All heads of claim over financial limits and outside time limits

6. Included and excluded
• Operator’s installation and all property on site
– “injury to and person or damage to property of any person other
than the licensee” (NIA S7(1))
– Nuclear installation and all property on site (operation, cessation
or construction) deemed to be the property of licensee (NIA
S7(3)(b))
• Claims from parties in non-convention countries; e.g. ROI

7. Key interpretation issues
• “significant impairment of the environment”
Draft NIA S26(3): “does not include damage to the environment
which is not significant enough to be eligible for compensation under
this Act as property, whether or not the part affected is property in
respect of which such compensation can be sought”
• “measures of reinstatement”
Draft NIA S11A: “a measure reasonably taken to reinstate or restore
what has been destroyed or damaged in the environment or
establish the equivalent of what has been destroyed”
A reasonable measure is: one “appropriate and proportionate in the
circumstances”

8. Key interpretation issues
• “direct economic interest in the use of the environment”
Draft NIA S11G: the profits are from income generate[d] by an
activity “directly exploiting” the resources of a part of the
environment”
• “preventative measures”
Draft NIA 11H: “a measure taken to minimise or prevent injury to a
person ... damage to property or significant impairment to the
environment occasioning costs or losses”
A reasonable measure is: one “appropriate and proportionate in the
circumstances”