What If China Has a Fukushima?
China has never suffered a Three Mile Island-like nuclear power plant accident, much less a Chernobyl meltdown or a Fukushima disaster.
But now that the government under Premier Li Keqiang has put the country on a fast-track for nuclear power development, with dozens of new reactors scheduled to launch by 2020, the insurance industry is focusing attention on the difficult question “what if?”
China’s insurers have been taking a cue from the National People’s Congress, the nation’s top legislature. A special panel under the NPC’s Environmental and Resources Protection Committee was recently ordered to draft a nuclear safety law, the nation’s first, with a built-in framework for power plant accident compensation.
NPC Standing Committee Vice Chairman Shen Yueyue said in February the law has reached the legislative agenda.
Zuo Huiqiang, general manager of the Chinese Nuclear Insurance Pool, expects the law to be enacted within two years. The 15-year-old CNIP is a collaborative effort of 25 Chinese insurance companies including China Reinsurance Group, Peoples Insurance Company of China and Ping An Insurance Co.
“During the early period for nuclear power development,” Zuo said, “coming up with plans for what to do if something goes wrong is the responsible thing to do.”
Certainly, there’s plenty of work to be done in the insurance arena to make sure China’s has a compensation response plan in place before an accident occurs. For example, liability caps for China’s nuclear accident insurance policies are now the lowest in the world.
Under a 2007 State Council directive spelling out nuclear accident compensation plans, any of China’s 19 nuclear power plant operators such as China Guangdong Nuclear Power Holding Co.(CGN), operator of the Daya Bay Nuclear complex in the southern province of Guangdong, and China National Nuclear Corp. (CNNC), which runs the Qinshan nuclear power plant in the eastern province of Zhejiang, must have insurance that covers financial losses and injuries up to 300 million yuan. If a legitimate compensation claim exceeds that maximum liability, the central government will provide up to 800 million yuan extra to cover the costs.
“Liabilities of 300 million yuan or less are to be assumed by nuclear operators, and the government is responsible for the next 800 million,” Zuo said. “Even though there’s no clear wording for anything over 1.1 billion yuan, the public nature of nuclear accidents almost definitely means that the government will bear the burden.”
Thus, the 2007 directive in effect is a form of government policy support for the nation’s nuclear plant operators. But because of the nation’s liability caps, the level of support is relatively modest compared to what’s in place in other countries that use the atom to generate electricity.
China’s limited liability insurance system stands in sharp contrast to the unlimited liability coverage that protects the public in Germany, Switzerland, Japan, Belgium, Russia and the United States.
All other countries with nuclear power around the world, including Britain and Spain, have a limited liability system like China’s.
The Chinese insurance pool’s direct underwriting capacity is a respectable US$ 898 million, behind only Japan, Britain and Switzerland. In terms of compensation caps, Belgium has the highest at US$ 1.5 billion, followed by Japan and Switzerland at US$ 1.2 billion each.
In China, a lot more money would be needed to cover damage in the event of a major catastrophe.
“If there’s ever a problem, this liability limit will certainly be too low,” said Liu Yubo, CNIP’s deputy general manager....