Law needed to address third party liability insurance for nuclear damage

By Wang Jihong and Liu Ying, Energy Law Committee, All China Lawyers Association
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The consequences of damage due to nuclear accidents are huge. After the Fukushima disaster in Japan, many nations using nuclear power are placing more emphasis on the issue of indemnity for nuclear damage by revising their domestic laws to raise the indemnity limits on nuclear damage. Third party liability insurance for nuclear damage has been the best choice for nuclear power operators to meet the legal requirements for compensation for nuclear damage.

Third party liability insurance

Compensation for damage due to nuclear accidents refers to taking liability for compensating victims for personal injury, property loss or environmental damage caused by nuclear accidents. China is one of the few nations in the world that has no legislation re compensation for nuclear damage. The State Council’s Official Reply on the Issue Regarding the Liability of Compensation for Damage Due to Nuclear Accidents (document No. 64) is generally viewed by the industry as an essential set of Chinese rules for nuclear damage compensation.

王霁虹-律师-Wang-Jihong
王霁虹 律师
Wang Jihong

Article 8 of document No. 64 is used by the industry as a major basis for insurance companies to underwrite insurance for, and for nuclear power companies to take out insurance against, the liability for damage due to nuclear accidents. It states: “operators shall make appropriate financial assurance arrangements to ensure that they are able to discharge the compensation liability timely and effectively … in case of damage due to nuclear accidents. Before the commencement of operation of a nuclear power plant or the storage, transportation and reprocessing of spent fuels, they must take out insurance sufficient enough to meet their liability limits.”

In practice, insurance for liability of compensation for damage due to nuclear accidents – referred to as nuclear liability insurance – appears as third party liability insurance for nuclear damage in a catalogue of insurance products, in which the insured is the operator of nuclear facilities, while the insurance subject is the nuclear facility. Due to the limited number of nuclear facilities in China, no insurance companies are able to underwrite this insurance individually. Nuclear liability insurance for nuclear facilities in China is currently underwritten by the China Nuclear Insurance Pool (CNIP) set up on 2 September 1999. CNIP adopts a business model in which “it acts in its own capacity, arranges co-insurance among multiple insurers and cedes insurance to other insurers”.

The constitution of CNIP provides that third party liability insurance for nuclear damage covers the amount required to be insured for by the operators of various nuclear facilities – including nuclear power plants and facilities involved in the cycle of nuclear fuels, etc. – to comply with the relevant Chinese rules on nuclear damage, i.e., the prescribed limits on compensation of damage due to nuclear accidents.

In practice, insurance policies are issued by CNIP member companies for a term of one year renewable upon maturity each year. Before the first underwriting, a team of experts from the worldwide nuclear insurance pools will conduct a risk test on nuclear facilities. Insurance will officially commence only after these facilities are certified and passed. The worldwide nuclear insurance pools will subsequently conduct regular risk tests.

刘瑛-律师-Liu-Ying
刘瑛 律师
Liu Ying

Policy limits are determined in accordance with the relevant regulations in China. The policy limits currently used are based on article 7 of document No. 64, which says: “with respect to the operator of a nuclear power plant or the operator in the storage, transportation and reprocessing of spent fuels, the maximum compensation amount for damage caused by a nuclear accident is RMB300 million (US$48.5 million), while the maximum compensation amount for other operators is RMB100 million. In case the total compensable amount exceeds the specified maximum compensation amount, China will provide a maximum limit of RMB800 million in financial compensation.”

In practice, according to article 7, besides the US$45 million limit on the third party liability for a nuclear power plant, CNIP shall charge additional costs of US$1 million. But it should be noted that the constitution of CNIP expressly states that “policy limits will vary subject to any changes in the Chinese regulations”.

Policy limits to be raised

The development of third party nuclear liability insurance is lagging behind in China, mainly because legislation is not in place, giving rise to a number of issues such as the lack of insurance and inadequate policy liability limits.

The nuclear liability insurance amount currently provided by CNIP for nuclear facilities has been met by the requirement for the limits on liability of compensation for nuclear damage in document No. 64. On the surface, it appears that adequate insurance arrangements have been made for all nuclear facilities under commercial insurance coverage for any possible liability of compensation for damage due to nuclear accidents. However, due to the limitations on its legal status, document No. 64 could not necessarily assure that nuclear power companies are only liable for RMB300 million in compensation.

Document No.64 is neither a law nor a set of administrative regulations. It is only a normative document with a low legal status, issued by the State Council. In the event of a nuclear accident, victims can institute legal proceedings before a court for compensation for personal or property damage caused by the nuclear accident pursuant to the Tort Liability Law and other existing relevant provisions of the civil law. With respect to the pursuit of liability for environmental damage caused by the nuclear accident, not only the environmental administrative authorities have the right to impose administrative penalties in accordance with the Environmental Protection Law, Marine Environmental Protection Law or other relevant regulations. Moreover, the newly revised Civil Procedural Law also specifies an environmental public litigation regime under which the authorities and relevant organisations stipulated by laws can also take legal actions before a people’s court.

Victims can absolutely file lawsuits asking for more compensation according to other laws with a higher legal status. In this case, nuclear power companies could have chosen a higher amount of insurance to protect themselves. However, since the insurance policy limits on the third party liability insurance for nuclear damage covered by CNIP will vary subject to any changes in Chinese laws, it is not up to nuclear power companies to insure a higher amount. To change this situation, the only way is to introduce a piece of legislation with a higher status, such as Atomic Energy Law, to govern various issues such as the limits on, and the limitations of, action for nuclear damage compensation, as well as jurisdiction.

Wang Jihong is deputy director of the Environment, Resource and Energy Law Committee, All China Lawyers Association;Liu Ying also contributed to this article

Environment, Resource and Energy Law Committee

All China Lawyers Association

电话 Tel:

+86 10 8225 5610

传真 Fax:

+ 86 10 8225 5600

电子信箱 E-mail:

wangjihong@vtlaw.cn

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