As the world watches events surrounding Japan's Fukushima Dai-ichi nuclear plant unfold, questions have arisen about preparedness at nuclear facilities here in the U.S.

And while most of those questions concern preventing an accident at nuclear facilities in the event of an earthquake or other natural disaster, another question should be: How would insurance respond if an accident did occur?

In Japan, earthquake coverage is excluded from insurance policies covering nuclear facilities. That is not the case in the U.S.

According to an article on insuring nuclear facilities released by the Insurance Information Institute (I.I.I.), damages and injuries caused by a commercial nuclear accident in the U.S. are covered under a two-tier system: a private liability insurance tier made available by a pool of U.S. insurers called American Nuclear Insurers (ANI), and a second tier funded by assessments on nuclear power plant operators.

Congress created the program outlining this two-tier system in 1957 through the Price-Anderson Act, I.I.I. notes. It has since been renewed four times, most recently in 2005.

Claims under Price-Anderson can be for incidents resulting from theft, sabotage, transporting or storing nuclear fuel or waste, and the operation of reactors, I.I.I. says. And covered claims would include bodily injury, sickness, disease resulting in death, property damage and loss, and reasonable living expenses for people who have been evacuated from an affected area.

“There are no exclusions in our policy language for nuclear-related damages that are caused by or result from an earthquake,” according to Michael Cass, vice president and general counsel for ANI.

He notes that his expertise relates only to the first tier, which is covered by the insurers making up ANI, although he indicates the second layer would respond to losses stemming from quakes as well.

For the first tier, Cass says the policy limits are currently $375 million. While there are some differences, he notes that coverage is set up similarly to a traditional casualty policy: nuclear-plant operators pay premiums, and the insurers defend or indemnify claims depending on the nature of the incident.

Speaking to underwriting the nuclear plants, Cass says ANI has a basic formula insurers follow that takes in factors such as type of reactor, location of reactor in relation to population and value of property near the plant.

Cass says underwriting also includes an engineering loss-control component where plants are inspected periodically and rated. He says plant operators are “very cooperative” with the inspections

The industry's mutual insurance company, Cass notes, was formed by the plant operators and covers the plant's physical premises.

As for the second tier of coverage under Price-Anderson, Cass says capacity currently stands at around $12.2 billion.

Marshall Nadel, managing director of the global power group for Aon Risk Solutions, says the operators of 104 reactors in the country have kicked in $117.5 million each to reach that number.

Should the second coverage tier be depleted, I.I.I. says the Price-Anderson Act calls on Congress to decide whether any additional disaster funds are required.

Special Reports /

For U.S., Two-Tier Insurance System Covers Nuke Plant Accidents

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