By Isha Marathe

May 1 - (The Insurer) - As mothballed nuclear reactors in the U.S. are dusted off with capital injections from Big Tech to serve the ever-growing energy demands of the public, the new sector heads at Marsh and WTW are preparing for an influx of growth in nuclear construction and subsequent risk management.

A nuclear "renaissance" has been forecast for nearly 15 years, but has failed to come to fruition for reasons ranging from public opposition, increased affordability of natural gas and a rise in scalable alternatives like renewables.

However, tech behemoths like Microsoft and Amazon Web Services are signing 10- to 20-year power purchase agreements with utility companies to restart or build out idle nuclear plants that might support the energy-intensive data centres that power generative AI technology.

The U.S. Department of Energy has targeted a tripling of nuclear energy capacity by 2050 to meet the demands for electricity across the country, further bolstering the impetus for nuclear infrastructure.

For brokers and insurers, who see nuclear energy as a good risk, the changes spell a capital boost to previously atrophied nuclear supply chains, meaning more construction and more risk to underwrite.

NOT A 'DIRTY WORD' ANYMORE

"There are not a whole lot of brokers that specialise in the nuclear space, but I think we are going to see more that do so," said Kate Fowler, who joined Willis as global head of nuclear in April, after almost five years at Marsh.

Until now, "nuclear renaissance" has been "kind of a dirty word," she said, but conversations within the industry are starting to shift.

"It's the same on the insurer side," Fowler said.

"There is a small subset of insurers that have been particularly interested in nuclear construction, nuclear operations, and liability (but) we're starting to see more markets get interested, because there's a huge growth opportunity there, so it's something they want to invest in."

There are currently 94 nuclear power plants operating across 28 U.S. states. For the last few decades, underwriting has been focused on maintaining them.

But brokers are anticipating a shift from insurers simply managing aging assets to underwriting for the construction of new plants.

"A part of why I came into this role in the construction practice is that before we can do anything else with nuclear, we have to build them," Fowler said.

"Willis is making an investment ... to support clients that are new to the nuclear space, who are not your traditional utilities (but instead) tech companies or chemical companies or steel manufacturers (to) really serve as an advisor to them for nuclear as they look to actually construct a project and enter into those contracts with reactor technology companies."

Insurers have to learn to write risks for this changing sector, where not only new entrants and new tech are shifting risk, but also new investors, like banks, instead of solely utility companies, are making contributions, she said.

"There's a whole suite of things that the nuclear construction industry really hasn't had to think about, because we haven't had as much private investment in the sector before."

THREE BUCKETS OF CONSTRUCTION

Currently, nuclear underwriting is roughly divided into three parts: managing legacy reactors, the oldest of which is the Nine Mile Point Nuclear Station in Oswego, New York; restarting idle reactors with a flurry of tech interest, like the Three Mile Island Nuclear Generating Station in Pennsylvania; and the construction of new designs, like the advance nuclear reactor and the small modular reactors (SMRs).

Everett Hansen, who was appointed as Marsh's U.S. nuclear energy leader in March, said the space is "dynamic". He is seeing growth in all three buckets.

With a higher frequency of licensing extensions within the legacy or aging reactors, more cash is being put forth to restart shuttered reactors, and new entrants into nuclear are interested in building brand new reactors.

Subject to regulatory guidelines, some of the new SMRs may start construction as early as 2026, and insurers and brokers are eager to learn how to underwrite for the new design and engineering.

"For many, many years, we have been supporting (nuclear growth) with traditional legacy sources, large point sources of generation," Hansen said. "Now we are eager to extend our expertise in the space to concepts that are new to insurers."

NUCLEAR AS A 'GOOD RISK'

Both Hansen and Fowler said they are aware of the longstanding stigma around nuclear plants as being dangerous in the event of an accident. But they see nuclear plants are a good risk, and believe public perception is changing accordingly.

"When people think about nuclear accidents, their minds go to Three Mile Island, Chernobyl and Fukushima," Hansen said. "They think about nuclear on its worst day.

"(However), nuclear loss events are high severity, but low frequency."

Hansen said a nuclear power plant may be the best-engineered risk an insurer can take on due to stringent quality control measures, highly involved regulators ad checks from various authorities throughout construction into operation. Additionally, reactor licensees are required to demonstrate financial assurance to the third-party public for an off-site release, as per the Nuclear Regulatory Commission.

Insurers take on nuclear risk from a first-party and third-party perspective in the U.S., providing coverage for construction and accidents during operation.

"What makes a nuclear property policy different than any other type of property policy is that it affords coverage for decontamination," Hansen said.

Nuclear plant licensees are required to purchase a minimum $500 million primary layer, which is butted by a retrospective rating program which sits in excess of that. The total indemnity available for a nuclear incident in the U.S. is approximately $16.2 billion, beyond which Congress is required to act, Hansen said.

"So there's a significant amount of financial insurance that is pledged," making the sector especially attractive, he said.