1. WWW.PRICEFORBES.COM INLA/AIDN Nuclear Inter Jura 2014 Buenos Aires – 20-23 October Mark Tetley Price Forbes & Partners Ltd 1 Nuclear insurance: yesterday, today, tomorrow

2. WWW.PRICEFORBES.COM Nuclear law….? 2

3. WWW.PRICEFORBES.COM Nuclear insurance: yesterday, today, tomorrow I.History of nuclear insurance II.Current topical matters III.Future improvements 3

4. WWW.PRICEFORBES.COM 4 What is insurance? Risk management options RetainControlAvoidTransfer Others Insurance A financial safeguard against the economic consequences of loss events

5. WWW.PRICEFORBES.COM A history of nuclear insurance I Nuclear electricity production caused difficulties for insurers in the 1950s:  Unknown risk.  Low frequency for nuclear events.  Few insured installations.  Unknown, widespread loss accumulation potential.  High severity (catastrophe) potential. “..circumstances may arise which can result in loss of control over an atomic reaction….”. “..circumstances may arise which can result in loss of control over an atomic reaction….” 1957 insurers’ report into risks posed by nuclear industry. 5

6. WWW.PRICEFORBES.COM A history of nuclear insurance II Result: nuclear exclusion clause in insurance policies, to channel liabilities. First formation of nuclear insurance pools & development of nuclear liability legislation: – 1954: US - Energy Act (sect.170 1957 Price- Anderson Act) – 1959: UK - Nuclear Installations (Licensing & Insurance) Act – 1959: Germany - Atomic Energy Act Note that these & others were introduced prior to the 2 major nuclear liability Conventions. 6

7. WWW.PRICEFORBES.COM 7 Liability & property insurances Onsite – assets & cash flow Property insurance Offsite – legal obligations Liability insurance Fukushima Daiichi, Japan

8. WWW.PRICEFORBES.COM Nuclear Insurance Pools Nuclear Insurance pools are open to all insurers: – Enables participation regardless of insurer’s size – Access to whole market’s knowledge, innovation & experience – Provides sufficiently resourced claims settlement entity Acceptances on net retention basis: – Ensures concentration of nuclear risks in pool Reciprocal exchange with other pools: – Enables easy access to full global insurance capacity – Facilitates rapid & easy interchange of information Risk transfer - true distress funding 8

9. WWW.PRICEFORBES.COM Mutuals & captives Mutuals: – Nuclear industry owned insurance entity – Homogeneity of treatment of members – Reliance on reinsurance – Same capital as nuclear industry Captives: – Utility owned insurer – Same capital as parent Risk retention - better suited for smaller losses rather than catastrophe losses? 9

10. WWW.PRICEFORBES.COM Nuclear insurance: yesterday, today, tomorrow I.History of nuclear insurance II.Current topical matters III.Future improvements 10

11. WWW.PRICEFORBES.COM Nuclear liability£140m £950m £140m Now New build - 2020 NPP asset value insurance£1.4bn NPP new build asset value insurance£12-16bn? £1.5bn £12 – 17bn Capacity + c. 1,000% 11

12. WWW.PRICEFORBES.COM New PC requirement: c.$1.5bn minimum Newheadsofdamage 30 yearsTIME Today: 10 years SCOPE OF COVER SCOPE OF COVER >>> now + environmental c.$1.5bnAMOUNTOFCOVER $0m Coverage Extended time to make claim - 30 yrs 12

13. WWW.PRICEFORBES.COM Erosion of strict liability Suppliers not generally liable, but recourse ‘if…so provided expressly by contract’ (PC Art6 (f)) Indian NTPL legislation: S.17. Result: – Some contractors are being asked to take on limited liability risk. – More difficult risk exposure accumulation for insurers. 13

14. WWW.PRICEFORBES.COM New build exposure 14 Hinkley C: new build Hinkley B: operational Hinkley A: decommissioning Hinkley Point NPP, UK

15. WWW.PRICEFORBES.COM Risk management Ageing & maintenance: need for investment. Greater use of contractors: safety culture compromised? PLEX & decomm activities: material ‘change of risk’? Increase focus on HP assessment & best practice. New build: skills shortages & brains vs. experience. However: nuclear still one of the best risks. 15

16. WWW.PRICEFORBES.COM Nuclear insurance: yesterday, today, tomorrow I.History of nuclear insurance II.Current topical matters III.Future improvements 16

17. WWW.PRICEFORBES.COM Legal harmonisation Of c.440 reactors globally, > 230 remain outside of the Conventions. Revised Conventions’ greater reference to national ‘competent courts’ & wider geographical scope may lead to greater disharmony. Other reviews: e.g. EC - a complication or positive development? Is CSC a step towards a harmonised global system? 17

18. WWW.PRICEFORBES.COM New markets & higher limits Nuclear Cat Cover Obligatory liability cover e.g. $10-15bn cover exceeding $2.5-5bn Effect on consumers: appr. 0.1 to 0.2 cents per Kw/h Operator financial security (similar to USA) Full Convention cover (Current insurance arrangements) Insurers can provide much more compensation: e.g. 2005 Hurricane Katrina $72bn. This would relieve taxpayers & public. Trigger would be ‘catastrophic’ nuclear loss only e.g. trigger of high radiation readings. Cover provided by a mixture of markets; it would not be Convention compliant cover. Greater risk transfer to safeguard operator’s position. More internalisation = better image? 18

19. WWW.PRICEFORBES.COM Claims & accident management Need to have full system in place before anything happens. Easy, practical operation for public using all media channels. Opportunity: ‘shop window’ for nuclear industry & nuclear insurance market. Damage rectification: safe vs. desirable. 19

20. WWW.PRICEFORBES.COM PRICE FORBES & PARTNERS LIMITED 2 Minster Court Mincing Lane London EC3R 7PD United Kingdom T: +44 (0)20 7204 8400 E: marktetley@priceforbes.com WWW.PRICEFORBES.COM............................................ Prepared by Price Forbes & Partners Limited 2 Minster Court, Mincing Lane, London EC3R 7PD © Copyright Price Forbes & Partners Limited 2014 Registered in England number 5734247. Registered office as above Price Forbes & Partners Ltd is a Lloyd’s broker and is authorised and regulated by the Financial Conduct Authority The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. There can be no guarantee that information herein is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation Questions?