The coverage would kick in if such companies were forced to suspend operations if the plant’s safety was compromised and an exclusion zone was implemented to contain the damage.

The cover was developed because conventional property damage and business interruption policies usually contain a radioactive contamination exclusion clause, which excludes any damage, denial of access or other consequences arising from nuclear radiation or contamination.

The Willis product is designed to respond not only when a nuclear exclusion zone is imposed following an earthquake or other natural catastrophe, but also when the exclusion zone is the result of other events or failures at a nuclear plant.

Toby Wemyss of Willis said at the time, “The significant business interruption losses in the wake of the Japanese tragedy brought home the importance of protecting your balance sheet against the forced closure of your own premises, or those of your critical suppliers or customers. With over 440 commercial nuclear power reactors operating in 30 countries, exclusion zone risk is a very real threat to business around the world. We were reminded again of the potential for loss on 23 August, when the earthquake centred near Richmond, Virginia, prompted the declaration of an ‘unusual event’ at seven US nuclear power plants, and we are proud to have found an insurance solution to help our clients mitigate this risk.”

Mr Wallin did not appear to too excited by the prospect of providing such coverage. He said that it is not uninsurable but remains generally excluded and did not suggest that Hannover Re for one would welcome such an extension with open arms.

The complexity and scale of contingent business interruption losses has been a hot topic of debate among European corporate insurance over the summer as many companies suffered unexpected interruptions in supply as a result of the events in Japan.

Mr Wallin said, however, that the contingent business interruption losses seen after the Japanese events were actually ‘well below expectations’ and that he expected a ‘higher magnitude’.

“The limits provided [in CBI policies] are not as high as normal property policies. It is not clear if we have seen all the losses yet but I think some commercial insurance buyers have pretty good supply chain management themselves,” he said.

Hans-Dieter Rohlf, Managing Director Non-Life Reinsurance North America, at Hannover Re said that at least in the US there are significant sub limits for contingent business interruption in the US, ‘a fraction’ of what is available for standard property coverage.

When asked what would be required to persuade Hannover Re and other reinsurers to offer higher limits to insurers that could be passed onto their customers Mr Wallin said prices would have to rise.

“This is difficult to calculate because it is more complex and yes there are always more requests for more coverage. But corporate insurance buyers have fixed budgets and there is a limited premium they want to pay and are not willing to exceed it. If significant added coverage was required then the overall premium may fall outside of the budget and you may have to cut back the limit,” he said.

Michael Pickel, member of the Hannover Re’s Executive Board focused on North America and Germany, added that the topic of CBI coverage ‘will certainly be discussed during forthcoming renewals’ in Germany.

More broadly Hannover Re believes that the overall market hardening experienced across the board in various degrees since earlier renewals this year will be ‘sustained’.

“Both the treaty renewals in April and those in June and July produced pleasing outcomes for our company. It is our expectation that the favourable trend in reinsurance premiums will continue in 2012; this is true not only of catastrophe covers,” said Mr Wallin.

For covers that were spared the catastrophe losses, such as casualty, however, Mr Wallin said that a hardening will only be felt to a ‘limited extent’.

CBI reimburses insureds for lost profits resulting from an interruption of business at the premises of a customer or supplier. The cause of the interruption—a fire or earthquake, for example—must be from a covered peril and must result in physical damage that inhibits the third party from being able to supply or receive the insured’s goods.

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