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> Nothing is uninsurable for the right premium. Can a nuclear plant operator get insurance against the costs of a nuclear meltdown? The costs of the Fukushima

> Nothing is uninsurable for the right premium. Can a nuclear plant operator get insurance against the costs of a nuclear meltdown? The costs of the Fukushima meltdown are reportedly $200 billion. Offering a policy with a downside that big would basically be gambling the entire company.

guiriduro 2y ago
Arguably they should, there probably would be a (huge) price premium for that insurance to be worthwhile, and it would also represent the former externality that the nuclear lobby like to forget about when comparing apples & oranges of energy supply. If people want to pay (a huge premium) to have nuclear power rather than say renewables, let them, but let there be a level playing field and let the disaster-insurance and decommissioning cost be factored into that price. Then see if there is any actual demand.
- michaelt 2y ago
  Perhaps I wasn't clear in what I'm trying to say. An insurance company can't pay out more money than they have. Imagine I'm the CEO of an insurance company with $50 billion in assets, and you're a customer wanting to insure against a risk with a 0.1% chance of happening. If you want the insurance to cover a payout $10 million, the expected value is $10k so if you're willing to pay a premium of $11k I'm happy to do business with you. If you want the insurance to cover a payout of $100 billion, the expected value is $10 million. But it doesn't matter if you're willing to pay a premium of $11 million, $20 million, $100 million. Because I don't have $100 billion, I can't tell you I'll pay out $100 billion. Sure, reinsurance exists - but that relies on there being some other insurance company around that can eat a $100 billion loss. Not many fools who'd take a gamble with that much downside.
DazWilkin 2y ago
Insurers buy insurance (reinsurance) in an attempt to offload excess risk. In your follow-up example, they could reinsure much of the $200B so that they're only liable for a small(er) part of the losses. The calculation is thus whether they can pay the premiums on the excess (and accept reinsurers' contractual terms) and still make money.

guiriduro 2y ago

Arguably they should, there probably would be a (huge) price premium for that insurance to be worthwhile, and it would also represent the former externality that the nuclear lobby like to forget about when comparing apples & oranges of energy supply. If people want to pay (a huge premium) to have nuclear power rather than say renewables, let them, but let there be a level playing field and let the disaster-insurance and decommissioning cost be factored into that price. Then see if there is any actual demand.

michaelt 2y ago
Perhaps I wasn't clear in what I'm trying to say. An insurance company can't pay out more money than they have. Imagine I'm the CEO of an insurance company with $50 billion in assets, and you're a customer wanting to insure against a risk with a 0.1% chance of happening. If you want the insurance to cover a payout $10 million, the expected value is $10k so if you're willing to pay a premium of $11k I'm happy to do business with you. If you want the insurance to cover a payout of $100 billion, the expected value is $10 million. But it doesn't matter if you're willing to pay a premium of $11 million, $20 million, $100 million. Because I don't have $100 billion, I can't tell you I'll pay out $100 billion. Sure, reinsurance exists - but that relies on there being some other insurance company around that can eat a $100 billion loss. Not many fools who'd take a gamble with that much downside.

DazWilkin 2y ago

Insurers buy insurance (reinsurance) in an attempt to offload excess risk. In your follow-up example, they could reinsure much of the $200B so that they're only liable for a small(er) part of the losses. The calculation is thus whether they can pay the premiums on the excess (and accept reinsurers' contractual terms) and still make money.