NUCLEAR PROPERTY
INSURANCE COVERAGE
IN THE UNITED STATES
INLA Intra Jura
Congress
O c to b e r 2 3 , 2 01 4
Buenos Aires
Nuclear Electric Insurance Limited
AGENDA
 Introduction
 Company Overview
 Insurance Coverage Claims
 Loss Prevention
 Conclusion
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INTRODUCTION
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INTRODUCTION
 U.S. Nuclear Insurance largely handled by two Companies
 American Nuclear Insurers (ANI)
Third party nuclear liability insurance coverage
Price-Anderson Act of 1957 provides the legal framework for
potential nuclear third party liability claims
 Nuclear Electric Insurance Limited (NEIL)
First Party Coverage
Mutual enterprise that largely sets its own terms and coverage
framework
 ANI and NEIL competed in the Property Coverage area until
the mid to late 1990’s
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NRC PROPERT Y INSURANCE RULE
 Found in 10 C.F.R. 50.54(w)
Requires property insurance of either $1.06 billion or the insurance
cover generally available from private sources, whichever is less
 TMI showed importance of coverage and changes needed
Regulations prioritize recovery to decontaminating the site and
stabilizing the reactors
 Prioritization is not automatic, costs must exceed $100 million
 Prioritization requirement ends when the reactor stops posing “any
significant risk to the public health and safety”
 NEIL’s Policies designed to comply with the Regulations
Referred to as “Nuclear Liability Coverage”
 No Statutory or Regulatory Property Insurance Requirements
in E.U. Member countries (Belgium and Spain)
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COMPANY OVERVIEW
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WHAT IS NEIL?
 Mutual Company with 83 Members
Have insurable interest in a nuclear plant
Formation of Nuclear Mutual Limited in 1973
Coverage provided by NEIL and two subsidiaries
 Overseas NEIL Limited – Outside North America
 NEIL Specialty Insurance Company – Excess Cover to Members
 Today, the NEIL companies insure on a Member basis
100 operating nuclear units in U.S.
18 shutdown nuclear units in U.S.
5 Nuclear units under construction in the U.S.
15 nuclear units internationally (Belgium and Spain)
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MISSION STATEMENT
We fulfill our continuing core responsibility of insuring
our Members’ nuclear risks by:
 Maintaining the financial strength to cover two full -limit losses,
 Promoting industr y risk management and safety practices,
 Providing value and equitable treatment, and
 Prudently pur suing oppor tunities that ser ve the Membership.
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INSURANCE COVERAGE
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INSURANCE OVERVIEW
 Insurance industry is built on the “law of large numbers”
e.g. - can’t identify which house will incur a fire, but can quantify
how many with statistical accuracy
 Statistical models work with large homogenous sample sizes
NEIL’s Members represent a somewhat homogenous group, but
not enough population for statistical accuracy purposes
 General Insurance Industry claims forecasting is further
enhanced by relatively small limits of fered – replacement
value of home, car, etc…
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INSURANCE OVERVIEW
( C ON T INUED)
 NEIL’s Mission leads to design for insurance of infrequent and
large claims (Low frequency and high severity )
 NEIL’s Loss Control Program is intended to monitor the
conditions at insured facilities to assure that the risk profile
is reasonably consistent across the Membership
 Objective is that each insured plant presents approximately
the same level of risk to the Mutual
 Minor dif ferences in risk are reflected through premium
adjustments (penalties & credits )
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PRIMARY PROPERT Y COVERAGE
 Property Damage caused by an “Accident”
$1.5 Billion Limit
 Indemnity Policy
Costs incurred to repair Property Damage caused by the Accident
Replacement Cost for equipment – “like kind and quality”
Upgrades or improvements not covered
Recovery as costs incurred
 Prioritization of recovery for “Nuclear Liability Cover”
$100 Million in Property Damage and nuclear release
No Property Damage recovery permitted until Insured certifies NRC
agreement stabilization work complete or Insured has isolated
sufficient funds to cover the work
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PRIMARY PROPERT Y COVERAGE
 Natural Catastrophes
Deductible - $10 Million + 10% of Loss up to $500 Million
 Terrorism Covered
Rolling 12-month aggregate limit of $3.24 Billion
U.S. Terrorism Risk Insurance Program
 Unique coverages
Decommissioning Fund shortfall
Functional Total Loss
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EXCESS PROPERT Y COVERAGE
 Coverage split above $1 .5 Billion
Coverage follows the Primary Property coverage
 Nuclear Losses
Loss must involve Nuclear Liability Coverage
Excess coverage of up to $1.25 Billion provided by NEIL
Covers Nuclear Liability costs and non-nuclear Property Damage
losses
 Non-Nuclear Losses
Claim does not involve Nuclear Liability Coverage
Excess property coverage up to $750 Million provided by NEIL
Specialty Insurance Company (wholly -owned captive subsidiary)
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NUCLEAR PROPERTY INSURANCE
Nuclear
Non-Nuclear
Property Only
Excess Property Layer
Nuclear Events Only
$1.25 Billion
Excess Property Layer
Non-nuclear Only
$750 Million
$1.5 Billion
Primary Property Layer
$1.5 Billion
Primary Property Layer
$1.5 Billion
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ACCIDENTAL OUTAGE COVERAGE
 Outage caused by Property Damage caused by an Accident
Cover Insured’s costs to purchase replacement power
Time it should take to repair Property Damage and return Unit to
service with use of “due diligence and dispatch”
Differs from traditional Business Interruption coverage
 Maximum Limit is $490 Million
Weekly Indemnity Amount selected by Insured
 Up to $4.5 Million per week
Paid out over a period of up to three years
 100% of Weekly Indemnity for first 52 weeks, 80% thereafter
 Deductibles based on number of weeks the Nuclear plant is
not operating following the Loss event
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ACCIDENTAL OUTAGE POLICY
( A SSUME $ 3 .5 M M / WEE K & 1 2 W E E K DE DUC T I BLE)
174 Weeks
$490 MM
Next 110 Wks @
80% of $3.5 MM
$327.6 MM
(Non-Nuclear
Outage limit)
64 Weeks
$182 MM
1st 52 Wks @ $3.5 MM
12 Weeks
$0
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COVERAGE
Accident Definition
"Accident" means a sudden and fortuitous event, an
event of the moment, which happens by chance, is
unexpected and unforeseeable. Accident does not
include any condition which develops, progresses or
changes over time, or which is inevitable.
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PRINCIPAL EXCLUSIONS IN POLICIES*
 Gradual accumulation of radioactive contamination
 Fraudulent, dishonest or criminal acts
 Rust, erosion and corrosion of any kind
 Any form of deterioration or wear and tear
 Pitting, cracking, blistering, etc .
 Faulty workmanship and/or design
 Amounts collectible under warranties or guarantees
 Regulatory Shutdowns or work
* Exclusion generalized for presentation purposes
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LIMITS PURCHASED FROM NEIL AS
OF JULY 1, 2013
3,500
US$ Millions
3,000
NEIL Outage
NEIL Property
2,500
2,000
1,500
1,000
500
0
Perm. S/D
Sites
Operating Sites
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BENEFITS OF THE MUTUAL
 Self Determination – Members establish Policy terms and
conditions
Policies subject to New York law
Member intention in drafting is important to interpretations
 Representatives on three Member Advisory Committees
Insurance Advisory Committee (IAC) reviews Policy coverage and
language, rating programs and premiums
Engineering Advisory Committee (EAC) establishes and reviews Loss
Control Standards, and monitors staff implementation of them
Legal Advisory Committee (LAC) advises the Company on legal related issues and matters
Revisions to Policies, Rating Programs and Loss Control Standards
must be approved by Board of Directors
 Result is the NEIL’s Policies and Standards contain various
provisions that are unique to the Mutual
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CLAIMS
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CORE NUCLEAR PROGRAM CLAIMS*
 377 claims filed since 1973
 178 paid claims
 Over $2.5 billion in Property Damage and Accidental Outage
claims paid
* Through December 31, 2013
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COVERAGE DETERMINATION
PROCESS
 Was there “Property Damage”?
 Was the damage caused by an “Accident” as defined in
the policy?
 “sudden”, “fortuitous”, “event of the moment”, “happens by
chance”, “unexpected”, “unforeseeable”, etc.
 Do any of the policy exclusions apply?
 Examples: “wear and tear”, “fatigue of any kind”, “rust,
erosion, or corrosion of any kind”, “amounts collectible from
a contractor or vendor under a guarantee or warranty”, “faulty
workmanship, material, construction or design”, etc.
 Are there any exceptions to the exclusions?
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DISPUTES
 Alternative Dispute Resolution mechanism are encouraged
Peer Review
Early Neutral Evaluation
Mediation
 Final and binding arbitration
UNCITRAL Rules
 Unique relationship of Insurer and Insured considered
Intent of parties in drafting language considered
Contra Proferentem not applicable
Documents related to prior reviews and consideration by the
Members
Prior decisions by NEIL on identical/similar issues
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LOSS PREVENTION
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LOSS CONTROL PROGRAM
 Each insured plant should present approximately the
same risk to the Mutual
Loss Control Standards that include minimum requirements for
insurability, and penalties and credits for premium adjustment
Principal focus - Property/Fire Protection and Boiler & Machinery
 Primarily address balance-of-plant (non-nuclear) areas
Loss Control Evaluations
 monitor the conditions at insured facilities,
 Assess whether risk profile is reasonably consistent
Special consideration given to increasing or emerging risk areas
 Turbine Risk Review – Review of all insured turbine shaft lines
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LOSS CONTROL PROGRAM
 Loss Control Standards
 SHALL Requirements
 Mandatory - all plants expected to meet
 Non-compliance results in premium or deductible adjustments and
potential removal of coverage
 “should” Requirements
 Desirable, but not mandatory
 Non-compliance results in premium adjustments
 Revisions
 Loss Experience
 Member/Staff/Plant personnel input
 Approved by the Members’ Engineering Advisory Committee (EAC) and the
Board of Directors
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SUCCESS OF NEIL
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NEIL A SUCCESSFUL ENTERPRISE
Inception to date –Year-End 2013
$ in Billions
Premiums Collected
$7.0
Claims Payments
$3.3
Investment Earnings
$7.8
Distributions Paid to Members
$6.1
Year-End 2013
$ in Billions
Policyholders’ Surplus
$3.9
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QUESTIONS?
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