"SMR Expansion and the Limits of Nuclear Insurance Pools" Report
Ambiguous Liability When Fuel-Loaded Modules Cross Borders
Building a System Through Mutual Insurance and Reinsurance Participation
The Korea Insurance Research Institute suggested on February 1 that, although the small modular reactor (SMR) market is expanding, a comprehensive nuclear insurance system for exports should be proactively established, as the current insurance framework is insufficient.
Small Modular Reactors (SMRs) are gaining attention as the next-generation energy source. Unlike large reactors that produce over 1000MW of output, SMRs generate less than 300MW and are designed as modular units by integrating major components. They offer higher safety than conventional large nuclear power plants, require less installation space, and have simpler design and operational procedures, reducing the likelihood of failures. In an era where global electricity demand is rapidly increasing due to the explosive spread of AI technology and the proliferation of electric vehicles, there is hope to secure a leading position in the global market through the development of Korean-style SMR technology. The photo shows Yongse Kwon, a senior researcher at the Innovation Small Modular Reactor Technology Development Project Group in Yuseong District, Daejeon, inspecting the heat exchange process of the innovative SMR through a hologram simulation. Photo by Jin-Hyung Kang
According to the report "SMR Expansion and the Limits of Nuclear Insurance Pools," authored by Jinok Kim, senior researcher at the Korea Insurance Research Institute, the global insurance industry is striving to address the SMR insurance gap by expanding private underwriting capacity and developing new products linked to product liability (PL) insurance.
According to the report, global electricity demand is expected to increase by approximately 40% by 2035. Global SMR development has moved beyond the design and licensing stages and has now entered the demonstration and construction phases.
According to the SMR dashboard of the Nuclear Energy Agency (NEA) under the Organisation for Economic Co-operation and Development (OECD), the proportion of projects that have successfully attracted private capital increased by 81% compared to the previous year.
With SMR commercialization approaching, demand is expected to arise for construction all risk (CAR) insurance and nuclear third-party liability (nuclear TPL) insurance.
The problem is that the existing nuclear insurance pool system, which is centered on large nuclear power plants, does not reflect the operational characteristics of SMRs. There are significant concerns about risk rejection or coverage gaps.
SMRs are manufactured at factories with nuclear fuel already loaded and are transported as finished products. When modules loaded with fuel cross borders or move through international waters, their legal status-whether they are "nuclear material in transit" or "operating nuclear facilities"-remains ambiguous.
In the event of an accident, not only is the applicable convention unclear, but it is also uncertain whether the manufacturer or the operator is responsible for compensation, raising concerns about potential coverage gaps.
For offshore floating SMRs or mobile reactors, the allocation of liability becomes unclear when passing through maritime or non-contracting state territorial waters. Conflicts may also arise between maritime law and nuclear liability law.
SMRs are used not only for electricity generation but also for supplying heat to industrial complexes and for hydrogen production. If an accident occurs at a site combining industrial facilities, it becomes extremely difficult to determine liability when a nuclear accident is combined with a general industrial accident.
Senior researcher Kim pointed out, "The most critical gap in the existing nuclear insurance system arises in areas outside of clear jurisdiction," adding, "When SMR modules loaded with fuel are transported across borders or float at sea, there is a legal blind spot where it is ambiguous which insurance pool-the country of manufacture or the country of operation-is responsible for compensation."
Overseas insurance industries and international organizations are exploring the introduction of SMR-specific risk models and strategies for utilizing private capital.
The International Atomic Energy Agency (IAEA) and the nuclear power industry are classifying SMRs as "low-risk facilities" to rationally adjust compensation limits and are considering the introduction of mutual insurance or captive insurance schemes.
Global brokers such as Marsh and Aon are proposing hybrid insurance products that combine PL and supply chain insurance, rather than traditional nuclear insurance, or are encouraging the participation of private reinsurance companies.
Manufacturers are also making efforts. Companies such as Rolls-Royce SMR in the United Kingdom are working with insurers from the design stage to standardize designs, thereby reducing risks and increasing the feasibility of financial procurement.
Senior researcher Kim advised that the insurance industry should proactively establish a comprehensive nuclear insurance system for exports to support the export of Korean SMRs.
He stated, "To support the export of innovative small modular reactors (i-SMRs) and to prevent contract failures due to unmet local insurance pool requirements, it is necessary to proactively establish a 'comprehensive nuclear insurance system for exports' with international-level coverage capacity and product structure."
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