Nuclear Liability Insurance (Price-Anderson Act)

Last Updated 7/28/17

The Price-Anderson Act was enacted into law in 1957 as an amendment to the Atomic Energy Act. Congress has extended the Act several times, making significant alterations, most recently in the “Energy Policy Act of 2005” which reinstated and extended the Act through December 31, 2025. The Price-Anderson Act is designed to ensure the availability of adequate funds to satisfy liability claims of members of the public for personal injury and property damage in the unlikely event of a nuclear accident. Through this program, the U.S. nuclear power industry has roughly $12 billion in liability insurance protection to compensate the public in the event of a nuclear accident.

The Act requires Nuclear Regulatory Commission licensees and Department of Energy contractors to enter into agreements of indemnification to cover personal injury and property damage to those harmed by a nuclear or radiological incident, including the costs of incident response or precautionary evacuation and the costs of investigating and defending claims and settling suits for such damages. The scope of the Act includes nuclear incidents in the course of the operation of power reactors; test and research reactors; Department of Energy nuclear and radiological facilities; and transportation of nuclear fuel to and from a covered facility.

The Price-Anderson Act is a consumer- and public-oriented legislation. It provides a substantial amount of insurance protection paid by the commercial sector at no cost to the public or the government. The Act provides “omnibus” coverage, that is, the same protection available for a covered licensee or contractor extends through indemnification to any persons who may be legally liable, regardless of their identity or relationship to the licensed activity. By providing omnibus coverage, those who may be harmed are assured of the availability of funds to pay their claims, and firms that contribute in some manner to the design, construction, operation or maintenance of covered licensees are all protected. Many of these companies, support services and equipment suppliers likely would not have participated in the nuclear industry without some liability limitation.

Owners of nuclear power plants pay a premium each year for $375 million in private insurance for offsite liability coverage for each reactor unit. This primary or first tier, insurance is supplemented by a second tier. In the event a nuclear accident, causes damages in excess of $375 million, each licensee would be assessed a prorated share of the excess up to $111.9 million. With 104 reactors currently licensed to operate, this secondary tier of funds contains about $12 billion.

The Price-Anderson Act motivated the private insurance industry to develop a means by which nuclear power plant operators could meet their financial protection responsibilities. Pooling provides a way to secure large amounts of insurance capacity by spreading the risks over a large number of insurance companies. The American Nuclear Insurers (ANI), which currently writes all nuclear liability policies, is a joint underwriting association created by some of the largest insurance companies in the United States.  Its purpose is to pool the financial assets pledged by member companies to provide the significant amount of property and liability insurance required for nuclear power plants and related facilities. ANI retains about one third of the liability exposure under each policy and cedes the remaining two thirds to reinsurers around the world. This approach allows ANI to marshal the resources of the worldwide insurance community and spread the uncertainties of the risk over a large financial base.

The Act has enabled insurers to provide stable, high quality coverage for nuclear risks. Since Price-Anderson was enacted, nuclear insurance pools have paid out about $151 million for claims. The Department of Energy has paid about $65 million during this same period.

It should be noted that the federal government provides similar insurance mechanisms for other types of disasters, such as floods; agricultural disasters; banks and savings and loan company failures; home mortgages; and maritime accidents. Liability limits also exist for oil spills; bankruptcy; worker's compensation; and medical malpractice.

Three Mile Island Accident
The Three Mile Island accident on March 28, 1979 demonstrates an example of how the Price-Anderson Act provisions work to effectively provide care for the public. Immediately following the accident, representatives of the insurance pools arrived in Harrisburg, Pa, and a central claims office was assembled. The insurance paid for the living expenses of families who decided to evacuate, although evacuation was not ordered. According to the American Nuclear Society, on the first day of operations, the office made payments of almost $12,000. By April 2, the pools had advanced funds to 2,400 persons. The payments increased daily and reached a per day peak of $167,286 on April 9. A total of about $1.2 million in evacuation claims were paid to 3,170 claimants. In addition, the insurance pools paid over $92,000 in lost wage claims to 636 individuals.

In addition to the cash advances and reimbursements, the insurance pools later settled a class-action suit for economic loss filed on behalf of residents in a 25-mile radius around Three Mile Island. Although no health damages from the accident were substantiated, insurance pools have paid approximately $71 million to date in claims and litigation costs connected with the Three Mile Island accident.