An Actuarial Note on Experience Rating Nuclear Property Insurance

By the end of 1971, the insurance pools writing nuclear property insurance (Nuclear Energy Property Insurance Association and Mutual Atomic Energy Reinsurance Pool) had since inception in 1959 earned about $47 million in premiums and had incurred loss and loss expense of nearly $15 million. After an accounting for all expenses, it was clear that a substantial profit had been made. However, it is recognized that this is a highly catastrophic coverage. The pools are now writing many policies with combined limits of $100 million. A nuclear accident might wipe out, in literally a few seconds, more than twice all premiums earned during the thirteen-year life of the pools. Since the level of earned premiums on all risks at the end of 1971 was only $I I .5 million, the insurers were opposed to any reduction in rates, in spite of the good record.