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By MATTHEW BRODSKY, senior editor/Web editor of Risk & Insurance®

What would happen if a dam on the Missouri River burst upstream from Nebraska's two nuclear power plants. The Missouri is the latest U.S. waterway to be swollen and dangerous. And it's already inundated one of those reactors, Fort Calhoun Station, in two feet of water. The other plant, Cooper Nuclear Station, is a mere three feet of flood water away from being shut down.

Let's take a breather ? and remember that, when it comes to safety, U.S. nuclear operators don't answer to just regulators. They also answer to their insurance companies.

One of them, Glastonbury, Conn.-based American Nuclear Insurers (ANI), an underwriting association of several private insurers, provides up to $375 million of first-layer liability coverage. ANI, according to its vice president and general counsel Mike Cass, employs a loss-control and engineering staff to inspect plants periodically and make loss-control recommendations.

For issues such as underground pipe leakage, which Cass called "old news."

"The industry has been pursuing this issue," Cass said. "We've been on top of this ourselves."

In fact, Cass could only recall one claim in ANI's history involving a leaky valve, which didn't even really involve underground pipe integrity, and to boot, the insurer helped its client successfully defend against the claim.

ANI's inspection process and standards are much more "granular" than NRC's, said Dan McGarvey, chairman of the U.S. power and utility practice at insurance brokerage Marsh.

"It is a pretty rare event," he said, when ANI finds something it doesn't like at an insured. In that case, ANI makes recommendations to fix it and gives a timeframe. If the changes are made, ANI can penalize the operator up to 30 percent on its insurance premiums. Conversely, McGarvey explained, operators that are ahead of their peers can earn a 20 percent credit on premiums.

At the other major nuclear insurance company, Nuclear Electric Insurance Ltd. (NEIL), loss control services are as effective, it seems. A captive insurer incorporated in Bermuda that offers coverages for property, terrorism, flood, earthquake, windstorm and radioactive decontamination, among others, NEIL provides two levels of inspections. One is for everyday property risks, like switch fires, boilers and machinery. The other is focused on radioactivity-related exposures, McGarvey said.

NEIL did not return calls for comment from Risk & Insurance®. It should also be noted that the captive had an underwriting loss of $3.5 million in 2010 because of past-year claims, according to its annual report.

Regarding the Missouri River floods, McGarvey would not speculate as to whether Fort Calhoun Station is suffering a flood loss. If so, it would be the first flood loss in the history of U.S. nuclear power.

"They're designed to weather this type of flood," the broker said about nuclear power instillations. "They've anticipated this type of flood."

Cass at ANI confirms that he knows of no liability claim in the organization's history resulting from flooding.

U.S. nuclear plants have never suffered an earthquake loss either. The only two catastrophe losses in history, according to McGarvey, occurred during hurricanes--Andrew and Katrina--and in both cases, damage was to nonessential facilities and the plants were operating again soon thereafter.

"Our plants have been tested," he said.

That's a testament to insurance-driven loss control, but it also has to do with regulators, who are not in cahoots with industry, McGarvey stressed.

"That is absolutely not the case in the United States," he said.

Take emergency preparedness. Soon after Sept. 11, 2011, NRC made it a priority, with three major campaigns, to ensure that operators could keep reactors cool after losing physical access to their plants, to delve into seismological issues, and to inspect plants for their ability to survive an offsite power outage.

No scary revelations came out of these campaigns, McGarvey said. That helps explain why, after the March 11, 2011, earthquake in Japan, the NRC had no knee-jerk reactions, such as plant closures or fines.

And after all, it was the NRC that asked that what-if question about the Missouri dams, demanding an answer from the U.S. Army Corps of Engineers.

Since Tohoku, the NRC has also conducted a double-check of emergency preparedness operations at U.S. nuclear plants, whose results were reported on by ProPublica. Inspectors found some flaws, such broken flood and fire pumps and missing drain valves. NRC deemed them "well short of being imminent safety concerns," though plant officials are said to already be working on them.

One can't be too safe with nuclear power plants.

July 5, 2011

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