January 27, 2015 1:18:37 am
After achieving the breakthrough in the US-India civil nuclear deal, the move to form the much awaited Indian Insurance Nuclear Pool has now commenced.
Four public sector insurers (Oriental, New India Assurance, United India and National Insurance) and General Insurance Corporation are contributing Rs 750 crore and the government pitching with a further amount of Rs 750 crore, taking the total pool capacity to Rs 1500 crore to begin with.
Private sector insurers, who have a market share of non-life insurance business of 40 per cent, or in other words provide 40 per cent of non-life market capacity, have shied away from the pool. But with the government indicating sovereign support, some of them may join the pool in the future and enhance the pool’s capacity, top insurance sources said.
Having a nuclear pool would also mean inspection by foreign re-insurers. This was an area of contention, but sources said this provision is being worked out. “Without a third party inspection, foreign reinsurers will not back the nuclear pool,” said a top source.
Once this pool is set up, there would be a collaboration between the national and international pool for sharing the risks. Both the entities will share each other’s liabilities.
With the pool providing cover to both operators and suppliers, future projects like the ones on the anvil by Westinghouse and Genco are likely to fructify soon. For long, Nuclear Power Corporation of India (NPCIL) has been taking insurance only for the ‘cold zones’ of their nuclear power plants. “But now it appears that they will go in for insurance of the ‘hot zones’ of the power plants,” said former IRDA Member KK Srinivasan.
Pricing for the cover by the nuclear insurance pool is yet to come out. If NPCIL decides to go in for cover for all its plants, it will have to pay insurance premium and to that extent the cost of power will go up. Hence pricing of the cover becomes critical. Eventually, it may be possible for Indian pool to reciprocally participate in other global nuclear pools like the ones in the USA, the UK, Europe and France and spread and share the risks, he said.
For the Indian insurance industry, apart from premium revenue, it will be a learning experience to build up knowledge and expertise on underwriting nuclear risks. Under the Liability Law, compensation of up to Rs 1500 crore will have to be paid in case of a mishap involving a nuclear plant.
As of now, nuclear power with an installed capacity of 4780 MW, out of the total installed power producing capacity of 253,389 MW (2014), forms less than 2 per cent of India’s total power supply. But with plans to generate 14,600 MW nuclear power by 2020 and provide 25 per cent country’s power by nuclear plants by 2050, nuclear energy will be a significant source of power supply in the future.
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