But why is nuclear risk excluded from renters insurance in the first place?
The short answer, at least for part of the coverage, is that all insurance policies exclude duplicate coverage.
Wait, what did we just say? Yes, if your renters policy covered nuclear hazard, specifically nuclear power plant hazard, you’d have duplicate coverage.
The reason behind that is that in 1957, the Price-Anderson Act was signed into law. It’s been amended over the years, but the basic premise is that it provides up to $375 million of liability coverage to the operators of nuclear facilities. That doesn’t sound like a great deal, but if you look at the damages from Three Mile Island, far less than that amount was paid.
In addition, there are provisions for excess coverage over and above that, which is funded separately. That coverage is in the billions of dollars, and takes care of damages should there be a nuclear facility incident which exceeds the $375 million in coverage provided by the primary under Price-Anderson.
The secondary coverage is provided by way of an assessment on the operators of all nuclear plants, which would result in approximately $12 billion in coverage, based on an assessment to each plant of a maximum of $111.9 million. Rather than asking the insurance industry to find insurance capacity for a risk of that size, each operator mitigates their risk by having a maximum exposure of just over one hundred million dollars. In this way, the excess coverage is a form of self-insurance which also manages to limit the amount of risk to which the operator is exposed.
Insurers in 1957 were not prepared to take on the significant – and poorly understood at the time – risks of nuclear power. That led to the passage of the law, and to date it has proven a largely sufficient way to insure nuclear risk from a liability standpoint.
If a state actor were to launch nuclear weapons at the United States, you’d likely have a coverage problem from a property standpoint. It’s likely, however, that the threat could be mitigated entirely, or at least quickly enough to avoid health risk through evacuations.
Businesses, on the other hand, are able to purchase terrorism risk insurance through TRIA. This coverage may in many cases exclude nuclear and biological incidents. Broadly speaking, however, a nuclear incident is a large enough disaster that insurance coverage is the least of one’s worries. There is, at this time, no coverage available in any market for personal lines coverage for nuclear hazards.
From a risk standpoint, however, this is a non-issue for most people. If a nuclear facility were to have an incident, there is coverage for the risk to people around the facility thanks to Price-Anderson. In the event of nuclear war, all bets are off and the level of devastation that would be seen is well beyond the capacity of any insurance at all to absorb.
Smaller losses, such as a dirty bomb, would be far more localized. Not only does this limit the risk, it also limits the chances of it impacting any individual person. It is quite likely that there would be a Federal program put into place after the event occurred. Limited historical experience with massive losses suggests that the government is able to ready to step in for such an incident. Katrina would be one example, and that was a much larger geographic area impacted than a risk such as a dirty bomb would affect.
Is it nerve-wracking that there are risks for which coverage is not directly available? Of course. But there are certain events which are so unlikely as to not be worth insuring. Nuclear attacks in the United States probably fall into that category. Keep in mind that the nuclear material that has been produced in the world has largely been well controlled and tracked. Also keep in mind that the people who would wish us ill are chasing substances which do not exist in order to bring nuclear ruin upon us.
That’s right. Someone, somewhere started a hoax about a deadly substance which terrorists are, apparently, desperately trying to get their hands on. That’s ironic, considering that they’re chasing a substance which does not exist, and never has existed. Considering that, the people who wish us ill are highly unlikely to get their hands on enough – or any – actually dangerous nuclear material with which to stage an attack. Further, the fact that they’re looking for something that doesn’t exist says that the number of qualified scientists and engineers on their side is rather limited, or perhaps zero.
That strongly suggests that we have a nearly zero risk of a non-state actor successfully staging a nuclear attack of any kind within the United States – or anywhere else, for that matter. Not only would they need a significant quantity of highly controlled materials, but they would need a large number of highly qualified people to handle every step of the process. Those people would need to work in a very specialized facility, nuclear weapons are simply not something that can be constructed in a cave in Afghanistan.
A much more serious concern is nuclear plants, and those nuclear plants have largely been operating safely for many years. Accidents have generally been well controlled. Exceptions to this are few in number and largely tied to bad judgment by operators or by the people advising operators.
There is liability coverage in place for nuclear power plants and other facilities. Insuring yourself against nuclear risk is probably unnecessary. It will, in fact, all be just fine.
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