Nuclear exclusion clause in reinsurance
A reinsurance treaty exclusion that removes damage caused by radioactivity and nuclear installations, sending that risk to specialized national pools; the exclusion also covers nuclear weapons.
On March 11, 2011, the Tohoku earthquake and tsunami damage the Fukushima Daiichi plant. Japanese property insurers and their reinsurers immediately see the same question: is the nuclear loss in the treaty? The answer is no, and the nuclear exclusion clause says so. Almost all property treaties include it, in a standard market wording. It excludes damage caused directly or indirectly by radioactivity, radioactive contamination, nuclear explosion, and liability resulting from a nuclear incident at an installation, with exceptions for isotopes for medical, industrial or agricultural use, away from nuclear installations. The reason is technical and economic. A major nuclear accident can cost tens of billions, impossible to pool in ordinary treaties, and it is therefore entrusted to national pools: Assuratome in France, ANI in the United States, Nuclear Risk Insurers in the United Kingdom, backed by international liability conventions (Paris, Vienna) which set a liable operator with caps. The exclusion raises two questions of interpretation. Is a fire that releases radioactivity in a hospital nuclear? And is the combination of an earthquake and a nuclear accident, as at Fukushima, settled as a single event? Case law and the treaty's wording distinguish these cases.
Textbook case. Japanese insurer with 2,000 businesses in the Fukushima evacuation zone. Damage caused by the earthquake and tsunami is insured (USD 500M, excess of loss reinsurance), damage resulting from radioactive contamination is excluded. A policyholder's plant flooded by the tsunami is indemnified, another contaminated but intact is not. The distinction turns on the cause: water, or radioactivity.
nuclear incident exclusion clause, nuclear exclusion reinsurance, nuclear exclusion treaty, nuclear energy risks exclusion, NMA nuclear clause
Follow the research
One letter a week. First, the week's underwriting note, when one is published: a dated, argued decision, signed by Paul Bernardski. Then what the observatory published on cyber risk, political risk and insurance. No account, no tracking.
No spam, one-click unsubscribe, no data ever sold.