1. nuclear Property Insurance Coverage in the United States
INLA Intra Jura Congress
October 23, 2014
Buenos Aires
Nuclear Electric Insurance Limited

2. Agenda Introduction Company Overview Insurance Coverage Claims
Loss Prevention
Conclusion

3. introduction

4. Introduction U.S. Nuclear Insurance largely handled by two Companies
American Nuclear Insurers (ANI)
Third party nuclear liability insurance coverage
Price-Anderson Act of 1957 provides the legal framework for potential nuclear third party liability claims
Nuclear Electric Insurance Limited (NEIL)
First Party Coverage
Mutual enterprise that largely sets its own terms and coverage framework
ANI and NEIL competed in the Property Coverage area until the mid to late 1990’s

5. NRC Property Insurance Rule
Found in 10 C.F.R (w)
Requires property insurance of either $1.06 billion or the insurance cover generally available from private sources, whichever is less
TMI showed importance of coverage and changes needed
Regulations prioritize recovery to decontaminating the site and stabilizing the reactors
Prioritization is not automatic, costs must exceed $100 million
Prioritization requirement ends when the reactor stops posing “any significant risk to the public health and safety”
NEIL’s Policies designed to comply with the Regulations
Referred to as “Nuclear Liability Coverage”
No Statutory or Regulatory Property Insurance Requirements in E.U. Member countries (Belgium and Spain)
In order to operate a nuclear power plant in the United States, the NRC requires that each plant have a minimum of $1.06B in property insurance coverage. This requirement has been in place since 1980s and the dollar amount was based on the amount of nuclear property insurance that was available at that time.
After TMI, the NRC’s Prop Ins. regulation was modified to require that property insurance first be used to decontaminate/stabilize after an accident before $ recovery for physical damage.
Language first adopted in 1984, current version in 1990
NEIL’s policies support the NRC’s prioritization requirement

6. Company overview

7. What is NEIL? Mutual Company with 83 Members
Have insurable interest in a nuclear plant
Formation of Nuclear Mutual Limited in 1973
Coverage provided by NEIL and two subsidiaries
Overseas NEIL Limited – Outside North America
NEIL Specialty Insurance Company – Excess Cover to Members
Today, the NEIL companies insure on a Member basis
100 operating nuclear units in U.S.
18 shutdown nuclear units in U.S.
5 Nuclear units under construction in the U.S.
15 nuclear units internationally (Belgium and Spain)
ANYONE BEEN TO BERMUDA?
I LIVED THERE FOR 15 YEARS
WHY BERMUDA?
INSURANCE REGULATION, NOT TAXES

8. Mission Statement
We fulfill our continuing core responsibility of insuring our Members’ nuclear risks by:
Maintaining the financial strength to cover two full-limit losses,
Promoting industry risk management and safety practices,
Providing value and equitable treatment, and
Prudently pursuing opportunities that serve the Membership.

9. Insurance coverage

10. Insurance overview
Insurance industry is built on the “law of large numbers”
e.g. - can’t identify which house will incur a fire, but can quantify how many with statistical accuracy
Statistical models work with large homogenous sample sizes
NEIL’s Members represent a somewhat homogenous group, but not enough population for statistical accuracy purposes
General Insurance Industry claims forecasting is further enhanced by relatively small limits offered – replacement value of home, car, etc…

11. Insurance overview (continued)
NEIL’s Mission leads to design for insurance of infrequent and large claims (Low frequency and high severity)
NEIL’s Loss Control Program is intended to monitor the conditions at insured facilities to assure that the risk profile is reasonably consistent across the Membership
Objective is that each insured plant presents approximately the same level of risk to the Mutual
Minor differences in risk are reflected through premium adjustments (penalties & credits)

12. Primary Property COverage
Property Damage caused by an “Accident”
$1.5 Billion Limit
Indemnity Policy
Costs incurred to repair Property Damage caused by the Accident
Replacement Cost for equipment – “like kind and quality”
Upgrades or improvements not covered
Recovery as costs incurred
Prioritization of recovery for “Nuclear Liability Cover”
$100 Million in Property Damage and nuclear release
No Property Damage recovery permitted until Insured certifies NRC agreement stabilization work complete or Insured has isolated sufficient funds to cover the work

13. Primary Property COverage
Natural Catastrophes
Deductible - $10 Million + 10% of Loss up to $500 Million
Terrorism Covered
Rolling 12-month aggregate limit of $3.24 Billion
U.S. Terrorism Risk Insurance Program
Unique coverages
Decommissioning Fund shortfall
Functional Total Loss

14. Excess property coverage
Coverage split above $1.5 Billion
Coverage follows the Primary Property coverage
Nuclear Losses
Loss must involve Nuclear Liability Coverage
Excess coverage of up to $1.25 Billion provided by NEIL
Covers Nuclear Liability costs and non-nuclear Property Damage losses
Non-Nuclear Losses
Claim does not involve Nuclear Liability Coverage
Excess property coverage up to $750 Million provided by NEIL Specialty Insurance Company (wholly-owned captive subsidiary)

15. Nuclear property insurance
Non-Nuclear Property Only
Excess Property Layer
Nuclear Events Only
$1.25 Billion
Excess Property Layer Non-nuclear Only
$750 Million
$1.5 Billion
Primary Property Layer
$1.5 Billion
Primary Property Layer
$1.5 Billion

16. Accidental outage coverage
Outage caused by Property Damage caused by an Accident
Cover Insured’s costs to purchase replacement power
Time it should take to repair Property Damage and return Unit to service with use of “due diligence and dispatch”
Differs from traditional Business Interruption coverage
Maximum Limit is $490 Million
Weekly Indemnity Amount selected by Insured
Up to $4.5 Million per week
Paid out over a period of up to three years
100% of Weekly Indemnity for first 52 weeks, 80% thereafter
Deductibles based on number of weeks the Nuclear plant is not operating following the Loss event

17. Accidental Outage Policy (Assume $3.5 MM/Week & 12 Week Deductible)
174 Weeks
$490 MM
Next 110
80% of $3.5 MM
$327.6 MM
(Non-Nuclear
Outage limit)
64 Weeks
$182 MM
1st 52 $3.5 MM
12 Weeks $0

18. Coverage Accident Definition
"Accident" means a sudden and fortuitous event, an event of the moment, which happens by chance, is unexpected and unforeseeable. Accident does not include any condition which develops, progresses or changes over time, or which is inevitable.

19. Principal Exclusions in Policies*
Gradual accumulation of radioactive contamination
Fraudulent, dishonest or criminal acts
Rust, erosion and corrosion of any kind
Any form of deterioration or wear and tear
Pitting, cracking, blistering, etc.
Faulty workmanship and/or design
Amounts collectible under warranties or guarantees
Regulatory Shutdowns or work
* Exclusion generalized for presentation purposes

20. Limits Purchased from NEIL as of July 1, 2013
Operating Sites
Perm. S/D Sites

21. Benefits of the mutual
Self Determination – Members establish Policy terms and conditions
Policies subject to New York law
Member intention in drafting is important to interpretations
Representatives on three Member Advisory Committees
Insurance Advisory Committee (IAC) reviews Policy coverage and language, rating programs and premiums
Engineering Advisory Committee (EAC) establishes and reviews Loss Control Standards, and monitors staff implementation of them
Legal Advisory Committee (LAC) advises the Company on legal-related issues and matters
Revisions to Policies, Rating Programs and Loss Control Standards must be approved by Board of Directors
Result is the NEIL’s Policies and Standards contain various provisions that are unique to the Mutual

22. Claims

23. Core Nuclear Program Claims*
377 claims filed since 1973
178 paid claims
Over $2.5 billion in Property Damage and Accidental Outage claims paid
* Through December 31, 2013

24. Coverage Determination Process
Was there “Property Damage”?
Was the damage caused by an “Accident” as defined in the policy?
“sudden”, “fortuitous”, “event of the moment”, “happens by chance”, “unexpected”, “unforeseeable”, etc.
Do any of the policy exclusions apply?
Examples: “wear and tear”, “fatigue of any kind”, “rust, erosion, or corrosion of any kind”, “amounts collectible from a contractor or vendor under a guarantee or warranty”, “faulty workmanship, material, construction or design”, etc.
Are there any exceptions to the exclusions?

25. Disputes Alternative Dispute Resolution mechanism are encouraged
Peer Review
Early Neutral Evaluation
Mediation
Final and binding arbitration
UNCITRAL Rules
Unique relationship of Insurer and Insured considered
Intent of parties in drafting language considered
Contra Proferentem not applicable
Documents related to prior reviews and consideration by the Members
Prior decisions by NEIL on identical/similar issues

26. Loss prevention

27. Loss Control Program
Each insured plant should present approximately the same risk to the Mutual
Loss Control Standards that include minimum requirements for insurability, and penalties and credits for premium adjustment
Principal focus - Property/Fire Protection and Boiler & Machinery
Primarily address balance-of-plant (non-nuclear) areas
Loss Control Evaluations
monitor the conditions at insured facilities,
Assess whether risk profile is reasonably consistent
Special consideration given to increasing or emerging risk areas
Turbine Risk Review – Review of all insured turbine shaft lines

28. Loss Control Program Loss Control Standards SHALL Requirements
Mandatory - all plants expected to meet
Non-compliance results in premium or deductible adjustments and potential removal of coverage
“should” Requirements
Desirable, but not mandatory
Non-compliance results in premium adjustments
Revisions
Loss Experience
Member/Staff/Plant personnel input
Approved by the Members’ Engineering Advisory Committee (EAC) and the Board of Directors

29. Success of neil

30. NEIL A Successful enterprise
Inception to date –Year-End 2013
$ in Billions
Premiums Collected
$7.0
Claims Payments
$3.3
Investment Earnings
$7.8
Distributions Paid to Members
$6.1
Year-End 2013
Policyholders’ Surplus
$3.9

31. Questions?