How Much Internalization of Nuclear Risk Through Liability Insurance?

An important source of conflict surrounding nuclear energy is that with a very small probability, a large-scale nuclear accident may occur. One way to internalize the financial risks associated with such an accident is through mandatory liability insurance. This paper presents estimates of the willingness to pay for increased financial security provided by an extension of coverage, based on the ‘stated choice’ approach. A Swiss citizen with median characteristics may be willing to pay 0.08 cents per kwh to increase coverage beyond the current CHF 0.7 bn. (US$ 0.47 bn.). Marginal willingness to pay declines with higher coverage but exceeds marginal cost at least up to a coverage of CHF 4 bn. (US$ 2.7 bn.). An extension of nuclear liability insurance coverage therefore may be efficiency-enhancing.