Little Knows a lot About Nuclear Insurance

Gary Little has been involved with nuclear insurance his entire career. He’s persevered through two mergers in three decades and passed eight national exams to earn his Chartered Property Casualty Underwriter (CPCU) credential. His mantra – staying calm and respectful during difficult situations will lead to better outcomes – has served him well.

So when we needed a subject-matter expert to help us understand nuclear insurance, we turned to our Global Risk Management and Insurance department and asked Gary to serve as our subject-matter expert. 

Q: Who is Duke Energy’s nuclear insurance provider? logo
A: Nuclear Electric Insurance Limited (NEIL) is the primary provider of property damage and accidental outage (replacement power) insurance for the company’s seven nuclear facilities in the Carolinas and Florida. In fact, NEIL provides insurance for all 104 nuclear plants in the U.S.

Q: How would you describe NEIL’s business model?
A: NEIL is a mutual insurance company formed by the nuclear industry in the 1970s. Member companies pay annual premiums to continue their insurance coverage. Though the basic policies are the same, the limits and deductibles may range. Companies have some flexibility. For example, they may exclude certain events – such as earthquakes or flooding – depending on their location, and buildings and equipment where coverage is not necessary.

 NEIL was originally designed to only provide property damage insurance, but coverage was expanded in the early 1980s to include replacement power insurance. 

Q: What is each company’s involvement?
A: Senior officers from member companies – such as CEO, chief nuclear officer or chief financial officer – may serve on the NEIL board. However, the board has a limited number of positions, and board members are not exclusively from member companies.

One representative from each company also serves on a NEIL advisory committee, including the Insurance Advisory Committee, Engineering Advisory Committee and Legal Advisory Committee. 

Q: What does nuclear insurance cover?
A: Nuclear insurance covers property losses and replacement power resulting from various types of accidents. Coverage is “all risk” based and includes fires, lightning strikes, hurricanes, tornadoes, windstorms, floods, earthquakes, equipment failures, building collapses and many other events.

Because nuclear is often the lowest cost source of power generation, insurance for the incremental cost of replacement power is available for extended outages arising from covered emergency events.

In the unlikely event of a radiological release due to an emergency event at a nuclear power facility, insurance also includes coverage for costs associated with protecting the public from injury, decontamination and clean-up. 

Q: Are nuclear plants required to have insurance?  
A: Yes, the Nuclear Regulatory Commission (NRC) requires all operating nuclear plants in the U.S. to carry a minimum of $1.06 billion in coverage. This is the estimated amount needed to protect the public and secure, stabilize and decontaminate a plant, if a nuclear emergency occurred. Though the NRC does not require replacement power insurance, Duke Energy opts to invest in this coverage as part of its risk management strategy.

Q: How does the claims’ process work? 
A: If an emergency event occurs at a nuclear facility, the member company provides NEIL written notification of the property damage and outage. The company also takes steps to protect the property from additional damage. NEIL then launches an investigation to determine coverage, which may involve visiting the site, interviewing site personnel, requesting documentation and engaging external experts.  

If the event is covered, NEIL reviews the accumulated repair and replacement costs and determines the amount paid. The member company then submits a “proof of loss” requesting payment. If acceptable, NEIL pays the agreed amount minus the applicable deductible. 

In all cases, the member company is required to submit a final “proof of loss” within 12 months of the date of the event (unless an extension is granted). For large-scale events that require more than a year to resolve, the member may submit periodic “partial proofs of loss” and receive partial payments from NEIL.

Q: Are there examples of claims Duke Energy has made?
A: Duke Energy’s most notable NEIL claim involved delaminations, or separation of concrete, in the concrete and steel containment building at the Crystal River Nuclear Plant (CR3) in Florida. The damage occurred in 2009 during a scheduled refueling outage when workers cut a 23-by-27 foot hole in the containment building to facilitate the replacement of two 500-ton steam generators.

The company and NEIL held multiple days of facilitated mediation to determine coverage for the event and associated outage. Under the terms of the mediator’s proposal, NEIL paid a lump sum payment of $530 million. This was in addition to the $305 million already paid. In all, customers will receive $835 million in insurance proceeds, marking the largest claim payout in NEIL history.

For more information on nuclear insurance, visit the Nuclear Regulatory Commission and Nuclear Energy Institute websites.