APPENDIX 8
Fourth memorandum by British Energy
INSURANCE
With the exception of nuclear liability, the
principal types of insurance carried by nuclear operators (or
"licensees") are the same as those taken out by other
types of generators, eg material damage and business interruption,
conventional third party liability, employers' liability and property.
NUCLEAR LIABILITY
UNDER THE
NUCLEAR INSTALLATIONS
ACT (NIA)
The NIA provides that the licensee of a nuclear
site has a duty to ensure that no occurrence involving either
nuclear material or ionising radiation causes personal injury
or damage to property other than property belonging to the licensee
or any other property which is on the site and is used in connection
with the operation of the nuclear installation. The licensee is
exclusively liable for a breach of this duty irrespective of fault.
Under the NIA, the licensee's liability to pay
compensation for a breach of this duty is currently limited to
£140 million per occurrence (excluding interest or costs).
The NIA requires the licensee to make provision, by insurance
or such other means as the Government may approve, for sufficient
funds to be available at all times to ensure that duly established
claims are satisfied up to £140 million in the aggregate
per site in respect of each of the periods of the licensee's responsibility
specified in the NIA. The NIA also requires that the Government
will make available such sums (in addition to insurance or other
funds which may be available from the licensee) as may be required
to ensure that all duly established claims (excluding interest
or costs) in respect of any occurrence are satisfied, up to 300
million special drawing rights (equivalent to approximately £240
million). Contributions to this amount are made by the Signatories
to the Brussels Convention. A claim for compensation which is
not satisfied out of this sum may, under the NIA, be satisfied
by the Government to such extent as it may determine. These provisions
mean that if the licensee's liability to pay compensation (£140
million per occurrence excluding interest or costs) exceeds the
provision (eg by insurance) that it is required to make (£140
million in the aggregate per site excluding interest or costs),
the shortfall must be paid by the Government. This could happen
where there are two or more occurrences at a site which, in aggregate,
give rise to established claims in excess of £140 million.
It remains possible, however, that the Government
may direct the licensee to begin a new period of responsibility
in the light of previous occurrences or claims thereby requiring
the licensee to reinstate any provision that may have been reduced
as a result of claims following an occurrence.
It is likely that these thresholds will increase
in the future. On 12 February 2004, the Government signed two
Protocols to amend the Paris Convention on Third Party Liability
in the Field of Nuclear Energy, 1960 and the Supplementary Brussels
Convention, 1963 which, together, increase the limit of liability
of nuclear operators to litigation by persons in states which
are parties to the Convention to a minimum of €700 million;
the liability of the Government to €500 million; and the
liability of the pool of funds contributed to by contracting parties
to the Brussels Convention to €300 million. Total compensation
available under the revised regime will be a minimum of €1.5
billion. In addition, the definition of nuclear damage will be
expanded to allow a broader range of damage to be compensated,
including economic loss and the costs of preventive measures.
Following ratification of the Protocol, the NIA will be amended.
LIABILITY ARISING
FROM TERRORIST
ACTS
Following the terrorists attacks in New York,
2001, nuclear liability insurance for terrorist attacks is provided
to licensees through normal insurance channels but reinsured by
Government. The insurers hold the benefit of an indemnity from
Government in the event that the insurer has insufficient funds
to meet claims. The availability and scope of the indemnity is
subject to annual review by Government. The insurers retain a
"first loss" in the event of a claim. This amount has
increased each year since the arrangements were established. In
the case of claims arising from acts of terrorism under material
damage and business interruption insurance, the insurers reinsure
the risks through a special purpose reinsurance vehicle whose
obligations are also underwritten by Government in the event that
it has insufficient funds to meet claims. (The special purpose
vehicle is similar to Pool/Reinsurance Ltd, a reinsurance vehicle
established in the conventional market following the 1993 IRA
bombings which also holds the benefit of a Government indemnity.)
| 
