Policy Issues

Nuclear Insurance Fund

All nuclear power plants are required to secure private insurance and to contribute to a federally managed pool of funds that would be available to compensate members of the public should a nuclear or radiological incident occur causing damages to the communities near the plant.

Nuclear power reactor licensees are required to maintain the maximum level of primary insurance available from private sources and to contribute nearly $100 million per unit to a secondary insurance pool.

This law originated in 1957 with the Price-Anderson Act, which has been revised several times. It constitutes Section 170 of the Atomic Energy Act. The latest revision was enacted through the Energy Policy Act of 2005 and retains the insurance provision through December 31, 2025.

The Act provides “omnibus” coverage, that is, the same protection available for a covered licensee or contractor extends through indemnification to any persons who may be legally liable, regardless of their identity or relationship to the licensed activity.

Nuclear Regulatory Commission (NRC) licensees and Department of Energy (DOE) contractors are required by the Act to enter into agreements of indemnification to cover personal injury and property damage to those harmed by an incident. This includes the costs of incident response or precautionary evacuation and the costs of investigating and defending claims and settling suits for such damages.

The scope of the Act includes nuclear incidents in the course of the operation of power reactors; test and research reactors; DOE nuclear and radiological facilities; and transportation of nuclear fuel to and from a covered facility. It does not include incidents involving nuclear waste.

The NRC codifies the conditions for indemnity agreements, liability limits, and fees for the different classes of licensees in 10 CFR Part 140. Power reactors rated below 100 MWe, for example, have lower primary insurance requirements than larger reactors, while the financial protection required for non-profit educational reactors is a function of their maximum power and the neighboring population.

The DOE also establishes indemnity agreements with its nuclear contractors. The liability limit for DOE facilities is $10 billion subject to adjustments for inflation. In the event of a nuclear incident involving damages in excess of the limits established in the Act, Congress could take further actions, including the appropriation of funds.

The Price-Anderson Act motivated the private insurance industry to develop a means by which nuclear power plant operators could meet their financial protection responsibilities. Pooling provides a way to secure large amounts of insurance capacity by spreading the risks over a large number of insurance companies. The American Nuclear Insurers (ANI), which currently writes all nuclear liability policies, retains about one third of the liability exposure under each policy and cedes the remaining two thirds to insurers around the world. This approach allows ANI to marshal the resources of the worldwide insurance community and spread the uncertainties of the risk over a large financial base. The Act has enabled insurers to provide stable, high quality coverage for nuclear risks.

In the 43 years of Price-Anderson protection, the nuclear insurance pools have paid a total of $151 million for claims. The DOE has paid about $65 million during this same period. It should be noted that the federal government provides similar insurance mechanisms for other types of disasters, such as floods; agricultural disasters; banks and savings and loan company failures; home mortgages; and maritime accidents. Liability limits also exist for oil spills; bankruptcy; worker’s compensation; and medical malpractice.

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