India Nuclear Insurance Pool

//India Nuclear Insurance Pool

At the time the electricity industry started building its first nuclear power stations some 45 years ago, society was presented with the potential perils related to the operation of those power stations. It was realized that the development of nuclear fission could result in failure to control the nuclear chain reaction. Not only could this cause damage to the nuclear installation concerned, it could also trigger radioactive contamination of both third parties and the installation itself. It was feared that the damage following a serious release of radioactivity, although its frequency and extent could not be forecast, would result in an enormous exposure to claims over a wide geographical area. Fears that were amply justified in 1986 with the explosion of the reactor #4 at Chernobyl.

Issues

In 2010, the Civil Liability for Nuclear Damage Act, 2010 (CLND Act, 2010) was enacted.

The Civil Liability for Nuclear Damage Rules, 2011 (CLND Rules, 2011) were notified in 2011 and were made part of subordinate legislation under the CLND Act.

Assignment of liability under the Nuclear Liability Act has been a hotly debated issue in relation to the US-India agreement and the promotion of nuclear commerce in India few years ago. Section 17(b) and section 46 of the Nuclear Liability Act have been the primary bones of contention.

Operator’s right of recourse to suppliers

Section 6 of the act limits the liability of an operator of a nuclear power plant and section 17 of the act provides the operator a right of recourse to suppliers after paying compensation under section 6. Sections 17(a) and 17(c) are comparable to article X of the Vienna Convention and article 10 of Annex to the Convention on Supplementary Compensation for Nuclear Damage. Section 17(b), which is unique to the Nuclear Liability Act, makes available a right of recourse if the nuclear incident was a result of an act of a supplier (or its employee) or supply of defective equipment or sub-standard services if the contract does not provide so.

Liability under other laws

Another cause for concern arises from section 46, which states that the provisions of the Nuclear Liability Act are in addition to, and not in derogation of, any other applicable law. Therefore, the Nuclear Liability Act does not exempt the operator from any proceeding under a law such as the law of tort. This means that an operator could be made liable under tort law for claims in excess of the limits specified in the act.

CLND Act has complicated efforts to spur the country’s use of atomic power as international equipment makers fear it would leave them liable for any accidents. Since its enactment in 2010, the country has taken steps to convince foreign suppliers that its law adheres to international standard.

In 2014, the US too had raised similar concerns about Clause 46 in particular. Following this, just before President Barack Obama’s visit to the country, India announced plans to build a nuclear insurance pool to address the issue.

In April 2015, Areva had also signed an agreement with NPCIL to expedite the programme. “Things are unclear over how much insurance cover does supplier have to take. There is still a lot of ambiguity in this,” the French official said.

Status

The Government has created an Indian Nuclear Insurance Pool on 12th June, 2015. General Insurance Corporation of India (GIC-Re), along with several other Indian Insurance Companies, have launched the Indian Nuclear Insurance Pool with a capacity of ₹1500 crore to provide insurance to cover the liability as prescribed under CLND Act, 2010. This has addressed issues related to CLND Act and had facilitated commencement of work in setting up new nuclear power projects.

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The present nuclear power capacity is 6780 MW comprising of 22 reactors. There are 9 reactors with a capacity of 6700 MW (including 500 MW PFBR being implemented by BHAVINI) under construction. The Government in 2017 has also accorded administrative approval and financial sanction of 12 nuclear power plants totalling to a capacity of 9000 MW. On their progressive completion, the installed nuclear capacity is expected to reach 8180 MW by 2020 and 22480 MW by 2031.

India’s first Nuclear Suppliers’ insurance policy for ‘Right to Recourse’ was unveiled by India Nuclear Insurance Pool.

The policy was unveiled by Atomic Energy Commission (AEC) chairman Sekhar Basu in Mumbai, Maharashtra. GIC-Re, along with several other Indian Insurance Companies, have launched the Indian Nuclear Insurance Pool with a capacity of ₹1500 crore to provide insurance to cover the liability as prescribed under CLND Act, 2010.

New India Assurance Co (NIAC) and India Nuclear Insurance Pool will issue the policy and administer the claims on behalf of the pool. Earlier NIAC had issued a policy for the operators of nuclear power plants under India Nuclear Insurance Pool by underwriting premium to the tune of Rs 100 crore.

India Nuclear Insurance Pool of 1,500 crore rupees was launched as per the mandatory provision under the CLND Act, 2010.

The pool provides capacity for insurance coverage to operators and suppliers for any nuclear liability towards third party. India Nuclear Insurance Pool also will offer policies on the nuclear operators liability insurance policy and a nuclear suppliers’ special contingency (against right to recourse) insurance policy.

It will also address third-party liability insurance and later expand into property and other hot zone i.e. inside reactor areas risk. At present, it only covers cold zones (outside reactor areas).

It will also provide the risk transfer mechanism to the operators and suppliers to meet their obligations under the CLND Act, 2010.

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Way Forward

The primary concern relating to section 17(b) is that it deviates from general international practice by making suppliers liable when the cause of a nuclear incident (for which the operator has paid compensation) can be traced to defective equipment or sub-standard services provided by a supplier. The operator can be made liable for a maximum of ₹15 billion (US$240 million) under the Nuclear Liability Act, which, as mentioned above, it can claim from the supplier.

Since amending the act was not considered feasible, the proposed solution to supplier’s liability under section 17(b) appears to be to create an “India Nuclear Insurance Pool”. Although the details are still being finalized, it has been reported that government-owned insurance companies will contribute about half of the required ₹7.5 billion and the rest will be provided by the government.

Suppliers’ concerns about being exposed to potentially unlimited tortious liability have been sought to be resolved by a “memorandum of law”. It is believed that this will amount to a legal opinion from the Attorney General stating the government’s understanding that the section is applicable only to operators and not suppliers.

It will be now up to the companies to follow up with their own negotiations and come up with viable techno-commercial offers and contracts consistent with India’s law and India’s practice so that reactors built with international collaboration can start contributing to strengthening India’s energy security and India’s clean energy options.

2019 India Nuclear Business Platform will take place on Nov 13-14 in Mumbai, India. We will discuss about the issues of India nuclear liability and insurance at Session 6 . To learn more about the first-hand insights on Indian Nuclear Programme from the local nuclear stakeholders

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By |2019-09-10T11:49:39+08:00September 10th, 2019|nuclear-industry|0 Comments