Fukushima nuclear accident (2011)

Tohoku coast, March 11, 2011, 2:46 p.m.: a magnitude 9.0 earthquake, then a tsunami that overtops the seawall at the Fukushima Daiichi plant, operated by TEPCO. The emergency generators are flooded, three reactors melt down, and the releases force the evacuation of more than 100,000 residents. Two mechanisms stack up. The first is the nuclear exclusion in property policies: neither the homeowners' policies of local residents nor the business interruption of firms in the evacuation zone respond to contamination. Redress goes through the operator's liability. The second is Japan's 1961 Act on Compensation for Nuclear Damage. It channels strict, unlimited liability onto the operator and requires financial security of 120 billion yen per site. That security has two layers. A liability contract placed with the Japanese nuclear insurance pool, which excludes earthquake, tsunami and volcanic eruption; and an indemnity agreement with the state, which covers exactly those perils. At Fukushima, the state paid the secured amount. The Act exempts the operator for a grave natural disaster of an exceptional character. The government did not apply it, and TEPCO remained liable. The rest, out of all proportion to the security, goes through a public body set up in 2011 that advances funds to the operator against repayment over decades. Compensation paid has exceeded 10 trillion yen, excluding decommissioning and decontamination. For an underwriter, the boundary sits in the contract: private capacity stops at the natural peril, and the state takes over. Not to be confused with the Tohoku earthquake itself, whose property losses fall under ordinary policies and, for homes, under the public earthquake reinsurance scheme.