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Nuclear Insurer Bids Plummet, Raising Solvency Concerns
31 Jul
Summary
- Insurance bids for nuclear power plants dropped significantly.
- Bidders had solvency ratios below regulatory minimums.
- Nuclear facility risk cover was placed at lower prices than previous years.
Bids for insuring Nuclear Power Corp of India's (NPCIL) Tarapur units 3 and 4 have dramatically decreased. Oriental Insurance quoted Rs 10 crore and United India Insurance Rs 10.98 crore for a one-year property damage program, far below NPCIL's budget of Rs 30.13 crore. This sharp reduction in bids is concerning as both Oriental Insurance and United India Insurance have solvency ratios significantly below the regulatory minimum of 1.50, reporting negative ratios as of March 31, 2025. The insurance program covers assets worth approximately Rs 7,500 crore with a loss limit of Rs 3,000 crore. This risk was previously priced between Rs 30-40 crore annually.
The aggressive pricing is particularly striking given the nature of the risk. Tarapur units 3 and 4 are non-safeguarded nuclear facilities, meaning they do not receive automatic reinsurance support from overseas markets, unlike civilian facilities under International Atomic Energy Agency (IAEA) safeguards. This limits global reinsurance capacity, typically leaving insurers to retain exposure or arrange expensive facultative cover. The situation underscores a broader concern about underwriting discipline within India's general insurance sector, especially as the Insurance Regulatory and Development Authority of India (Irdai) recently advised prudent underwriting amidst intense market competition.
