India’s Nuclear Insurance Problem
As the effects of climate change are increasingly felt around the world and nations scramble to shift away from fossil fuels in their attempts to meet their carbon-zero targets, nuclear energy has always been an enticing option but also a cause for concern.
With the events of Chernobyl and Fukushima still haunting our collective memories, nations have wildly different stances on this issue.
While some countries like Germany have decided to play it safe and do away with nuclear power plants completely, there are countries like Japan and India which continue to press forward in order to meet their ever increasing energy needs.
But while the possibility of a disaster cannot be downplayed, what happens in the event of one?
Since we are insurance brokers, we obviously want to bring to your attention the insurance aspect.
India currently has 22 active nuclear reactors, an installed capacity of 6,780 MW with nearly 20 nuclear power projects, including fuel facility cycles that are used to process uranium for use in the works. The goal? A nuclear power capacity of 22,480 MW by 2031!
The Civil Liability for Nuclear Damage Act, 2010 (CLND) says that Rs 1,500 crore would be required to compensate victims and pay for cleanup in case of a nuclear disaster. However, the India Nuclear Insurance Pool (INIP), which presently holds 11 non-life insurers and GIC Re, has only around Rs 700 to 800 crore.
That’s approximately half the requirement! The pool does NOT meet the requirements of the LAW! (As per the insurance session at the India Nuclear Business Platform, December 2022)
But what is the reason for this inadequacy?
Experts have also pointed to a lack of reinsurance for nuclear risk liability as one of the likely reasons for companies failing to pay their full share.
In 2014, the Indian insurance companies signalled their inability to raise more than half the amount required for the pool of insurance cover.
Some experts have raised concerns that the amount of Rs. 1,500 crore is inadequate to insure all 22 reactors annually.
So, what happens if the cost of a disaster exceeds the pool limit?
“In case liability exceeds Rs 1,500 crore, the government will have to pay the rest. The government owns and operates the country’s nuclear power plants for the people and is therefore responsible to them,” Prabir Purkayastha of the Delhi Science Forum, who was an expert witness for the Parliamentary Standing Committee for the Nuclear Safety Regulatory Authority Bill, 2011.
As per updated version of FAQs (version 2) on the Nuclear Liability Act released by the Department of Atomic Energy in 2020, “the gap between this (Rs. 1,500 crore) and 300 million SDR equivalent rupees will be bridged by the Central Government. Beyond 300 million SDRs equivalent rupees, India will be able to access international funds under the CSC.”
This means that the Indian Government has a maximum liability of Rs. 3,300 crore (in equivalent Special Drawing Rights or SDRs).
While this might seem reasonable, it must be remembered that, in March 2023, when the Government tried seeking additional compensation for the victims of the Bhopal Gas Tragedy, the Supreme Court ruled that:
” the Union of India, as a “welfare state”, showed “gross negligence” by not “making good the deficiency” by taking out a relevant insurance policy for the victims. “
Perhaps it is prudent to have in place adequate insurance to ensure sufficient compensation in the event of a nuclear disaster. Afterall, insurance works best only when it’s adequate.
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