[Chris2048]

When you say "why they're expensive" do you mean the plant itself, or the produced electricity?

In any case Fukushima is easily explained: They ignored the risk of tsunami despite two studies (and governmental bodies) warning of it. The real reason the Fukushima is so damaging, is that the Japanese are seen as generally "competent", so their mistakes/hubris are seen as reproducible anywhere i.e. "if the Japanese couldn't get it right".

[Arnt]

Either, since the income should justify the investment: One wants nuclear plant operators to have plenty of income, so as not to be tempted to save on maintenance.

I agree entirely with the hubris argument. And it's a harsh one, because if an organisation claims to be more competent than the Japanese and and safety-minded too, why can't it persuade an insurer to sell it liability insurance on normal commercial terms, at a justifiable price? It's a difficult argument to make.

[AnthonyMouse]

> if an organisation claims to be more competent than the Japanese and and safety-minded too, why can't it persuade an insurer to sell it liability insurance on normal commercial terms, at a justifiable price?

It's because nobody else buys that amount of insurance. A hundred billion dollar insurance policy has significant risks and costs to the insurer completely independent of the actual risk of a claim.

For one thing, the insurer is required to hold enough capital to pay out possible claims no matter how unlikely they are. So you're basically paying interest on that sum of money in the difference between the ordinary market rate of return and the lower return on the "safe" securities insurers are allowed to hold. That cost is completely independent of the risk of a claim; it's strictly based on the amount of insurance you want.

Then what happens if there is e.g. a major earthquake which causes a minor incident at a nuclear plant, so that 99% of the damage is caused by the earthquake but the insurer is a deep pocket and the judge is sympathetic to the earthquake victims? That's a risk an insurer has to account for, but it's not a risk you can address by improving the safety of the nuclear plant because the risk is rooted in politics.

When the risk of an incident is low enough, it's costs like that which dominate the premium for the policy. You can make the risk of a legitimate claim arbitrarily small and those costs would still be the same.

And it's an isolated demand for rigor. Nobody else is required to carry that amount of insurance. When a coal mine turns an entire town into a superfund site and kills thousands of people, they just file for bankruptcy. What would the alternatives cost if they had to carry the same insurance, or pay for their externalities?

[nradov]

That's why huge insurance policies are typically syndicated across multiple insurers with reinsurance companies taking on part of the risk.

[AnthonyMouse]

Reinsurance has nothing to do with it. Lawyers could convince a judge to make the nuclear plant insurance pay out to earthquake victims because no one else can. The increase in the premium from the amortized risk of that happening is the same whether you spread it across other insurance companies or not.

Try going to a major insurance company to get a policy that pays out in the amount of two hundred billion dollars in the event that you're abducted by aliens. If you can get the policy at all, the premium will be unaffordable, and it's not because the insurance company thinks there is a significant probability that you'll actually be abducted by aliens.