Global insurance cos shy away after Japan disaster
MUMBAI: The government's plan for a nuclear insurance pool has hit a roadblock as global insurance firms are shying away following the nuclear catastrophe in Japan that has raised concerns on high financial risk and restricted inspection access to facilities in the country. State-owned Nuclear Power Corporation and General Insurance Corporation (GIC), the only domestic re-insurer in the country, are finding it difficult to go ahead with the plan due to a lacklustre response from domestic and international players, according to sources close to the development.
After the nuclear disaster in a country expected to be one of the most prepared nations in dealing with such a crisis, governments of nuclear powered states, including India, may seek to transfer more financial responsibility to plant operators. This may further increase the liability on operators and suppliers for the country's nuclear projects, said a government official. Currently, India has a nuclear generation capacity of about 4,700 megawatt and plans to scale it up to 20,000 MW by 2020, in association with global nuclear powers.
India, the world's second-largest market for new reactors, with five under construction, passed a law last year to hold atomic-power equipment suppliers partly liable for damages from accidents, even in the case of operator error. Under the Civil Liability for Nuclear Damage Act, 2010, the liability limit per operator per event is estimated at Rs 1,500 crore. It plays a major role in the hastening of financial aid to be provided to victims while operators and suppliers need an insurance cover on such unwarranted, huge losses. However, the government's initiatives have taken a backseat on account of various issues such as lack of assessment of financial risk, which has raised a hot debate after the meltdown of the Fukushima nuclear reactors.
GIC CMD Yogesh Lohiya said the situation had changed and participation in the pool was on a voluntary basis. "There are some issues with the Department of Atomic Energy, which does not allow international inspectors to inspect the area. Underwriting policies without inspecting the risk is not feasible," said Mr Lohiya . Not many private insurance companies are willing to participate in the nuclear insurance pool. "We have got some responses but because of inspection issues, players are not willing to come forward," Mr Lohiya added. Some believe that domestic insurers are less familiar with handling such products. "We do not have the expertise to underwrite nuclear risks," said a senior official of a large non-life insurance company.
There are 26 nuclear insurance pools across the world for providing cover in case of nuclear accident. The pool size varies with the size of a plant, the machinery used and the levels of radiation expected. According to sector experts, it would be difficult to form an insurance pool in a country without proper understanding of financial risk and well-placed security measures for handling such cases to avoid heavy loss. Currently, neither the Indian Atomic Energy Act nor the Environmental Protection Public Liability Insurance Act, 1991, has the jurisdiction over accidents due to radioactivity . Some insurers are also sceptical over the government's preparedness for providing adequate information required before one gets into such business. "For domestic players, it's totally a new business with hassles at various levels," said a senior analyst with a broking company.
After the nuclear disaster in a country expected to be one of the most prepared nations in dealing with such a crisis, governments of nuclear powered states, including India, may seek to transfer more financial responsibility to plant operators. This may further increase the liability on operators and suppliers for the country's nuclear projects, said a government official. Currently, India has a nuclear generation capacity of about 4,700 megawatt and plans to scale it up to 20,000 MW by 2020, in association with global nuclear powers.
India, the world's second-largest market for new reactors, with five under construction, passed a law last year to hold atomic-power equipment suppliers partly liable for damages from accidents, even in the case of operator error. Under the Civil Liability for Nuclear Damage Act, 2010, the liability limit per operator per event is estimated at Rs 1,500 crore. It plays a major role in the hastening of financial aid to be provided to victims while operators and suppliers need an insurance cover on such unwarranted, huge losses. However, the government's initiatives have taken a backseat on account of various issues such as lack of assessment of financial risk, which has raised a hot debate after the meltdown of the Fukushima nuclear reactors.
GIC CMD Yogesh Lohiya said the situation had changed and participation in the pool was on a voluntary basis. "There are some issues with the Department of Atomic Energy, which does not allow international inspectors to inspect the area. Underwriting policies without inspecting the risk is not feasible," said Mr Lohiya . Not many private insurance companies are willing to participate in the nuclear insurance pool. "We have got some responses but because of inspection issues, players are not willing to come forward," Mr Lohiya added. Some believe that domestic insurers are less familiar with handling such products. "We do not have the expertise to underwrite nuclear risks," said a senior official of a large non-life insurance company.
There are 26 nuclear insurance pools across the world for providing cover in case of nuclear accident. The pool size varies with the size of a plant, the machinery used and the levels of radiation expected. According to sector experts, it would be difficult to form an insurance pool in a country without proper understanding of financial risk and well-placed security measures for handling such cases to avoid heavy loss. Currently, neither the Indian Atomic Energy Act nor the Environmental Protection Public Liability Insurance Act, 1991, has the jurisdiction over accidents due to radioactivity . Some insurers are also sceptical over the government's preparedness for providing adequate information required before one gets into such business. "For domestic players, it's totally a new business with hassles at various levels," said a senior analyst with a broking company.
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