IUA Scoping Paper – Disclosure - Data Dumps and Web Links

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					IUA Circular 099/08

To:         Chief Executives and Contacts of Ordinary and Affiliate members

CC:         Clauses Sub-Committee, Non-Marine Technical Committee, All IUA
            Underwriting Committees.

From:       Anthony Dickinson, Market Services Manager.
            Richard Camp, IUA Researcher.

                          Nuclear Exclusion for Property Treaty Business

 Subject: The IUA Nuclear Exclusions Working Party has considered the various issues
 involved in the use of nuclear exclusion which has culminated in the publication of IUA
 Clauses G510 and G511, which both exclude nuclear risks and is intended for use on
 Property Treaty business only. G510 excludes all nuclear risks, whilst G511 writes back
 peaceful uses of nuclear material.

 NOTE: From 2010, G510 and G511 will be assigned the reference IUA01-028 and IUA01-
 029 respectively.

 Introduction

 Since it was first published in 1994, NMA1975(a)/G52 has been used widely by the London
 Market to exclude Nuclear Energy Risks (as defined in the clause) and it has since become
 the de-facto market standard ‘nuclear exclusion clause’ used in policies. However, the
 original intent of this clause, which was to exclude Nuclear Energy Risks arising from
 Nuclear Installations, seems to have been overlooked so that there were some concerns
 that this clause was being used as the general nuclear exclusion clause.

 As a result of these concerns which were reported to IUA’s Clauses Sub-Committee, this
 committee established a joint working party with the IUA’s Property Treaty Group to review
 the scope of NMA1975(a)/G52 and to establish where the gaps in coverage exist between
 what is not excluded by NMA1975(A)/G52 and what is not picked up by Nuclear Risk
 Insurers Ltd. In order to clarify this position the Working Party engaged Simon Cooper,
 Partner at Barlow Lyde and Gilbert, to test these scenarios both against NMA1975(a)/G52
 and CL 356A. The results of this exercise can be found in section 2 of this circular.

 As with all IUA clauses, G510 and G511 for property treaty business, along with these
 associated documents, will be available from the IUA clauses website,
 www.iuaclauses.com. If there are any queries on the information provided please do not
 hesitate to contact Richard Camp (IUA Researcher) on richard.camp@iua.co.uk or 020
 7617 5446 or the undersigned on anthony.dickinson@iua.co.uk or 020 7617 5443.

 Anthony Dickinson.
 Market Services Manager
 October 2008

 DISCLAIMER: It is not compulsory for the clauses/wordings to be used as drafted nor are they intended to replace the exercise
 of independent judgement. It is the responsibility of each individual company to judge their own circumstances when deciding
                                           International Underwriting Association
                                     3 Minster Court, Mincing Lane, London EC3R 7DD
                                      Tel 020 7617 4444      Facsimile 020 7617 4440
whether or not to use this clause. Advice should be sought from legal advisors for clarification of the use and the intention of
these wordings. The IUA does not accept any responsibility for the subsequent interpretation of the clauses/wordings.


Comments/guidance notes are included purely for information purposes only.




                                                               2
                                          International Underwriting Association
                                    3 Minster Court, Mincing Lane, London EC3R 7DD
                                     Tel 020 7617 4444      Facsimile 020 7617 4440
Executive Summary


      NMA1975a should not be relied upon as a general nuclear exclusion clause. Whilst
       it successfully excludes losses arising from the production of electricity from
       radioactive materials, it is unlikely to exclude risks arising from the use of
       radioactive materials for other peaceful purposes, for example, medical equipment;

      In limited circumstance, the third limb of NMA1975a will exclude losses arising from
       the use of nuclear substances by research facilities where the property on site is
       ‘eligible for insurance by the relevant local Nuclear Insurance Pool’. In order to be
       eligible for insurance from NRI, the site must have a nuclear site license. At
       present, Silwood Park is the only university to warrant a license and it qualifies
       because it has a nuclear reactor;

      As with NMA1975a, CLA356a should not be relied upon as a general nuclear
       exclusion clause. The first three limbs, taken in their context, are likely to apply to,
       for the limbs one and two, to nuclear reactors and nuclear fuel, and in the third limb
       to nuclear weapons.

      The third limb of CLA356a has a wider exclusion for ‘radioactive, toxic, explosive or
       other hazardous or contaminating properties of any radioactive matter’. However,
       there is also a write back which applies to uses of radioactive isotopes, other than
       for nuclear fuel, for peaceful purposes. Therefore, the applicability of this write back
       would turn on the specific facts of the particular case.

      Neither NMA1975a not CLA356a would exclude losses arising from third party
       policies, for example business interruption for shops in town centres.

      As a result of these conclusions, the WP drafted two new wordings that can be
       used in place of NMA1975a, depending on the requirements of the underwriter;
       these are G510 and G511.




                                                 3
                                International Underwriting Association
                          3 Minster Court, Mincing Lane, London EC3R 7DD
                           Tel 020 7617 4444      Facsimile 020 7617 4440
Conclusion of Working Party

It was immediately clear to the working party from the advice received from BLG (see
Appendix 1) that NMA1975(a)/G52 was not appropriate as a general ‘nuclear exclusion’
clause. Underwriters should therefore give serious consideration to these shortcomings
when using NMA1975(a)/G52 if they wish to exclude risks arising from the peaceful use of
nuclear materials other than from nuclear power plants, or other sites that are eligible for
cover from the NRI, for instance, by virtue of a nuclear site license.

Equally, CL356(a) also has some shortcomings if used either as the primary nuclear
exclusion clause, or alongside another clause, such as NMA1975(a)/G52. The particular
shortcoming of this clause as an exclusion turns around what the term ‘use’ in the write
back of the final limb of this clause means. What this means is likely to be specific to the
facts of the case, but underwriters should bear in mind that where there can be doubt as to
whether the nuclear material was in use at the time of the loss, it might be debatable
whether the exclusion can be applied or not. Underwriters should also note that, where this
clause is used to supplement another clause (NMA1975(a)/G52), thought should be given
to any conflict that might arise between them. If an underwriter does not want this clause to
be paramount then, at the very least, the preamble should be deleted.

As a result of the WP’s deliberations, IUA have drafted two clauses which may be used by
underwriters to suit their requirements.

Please note that, as with all IUA clauses, it is not compulsory for the clauses/wordings to be
used as drafted nor are they intended to replace the exercise of independent judgement. It
is the responsibility of each individual company to judge their own circumstances when
deciding whether or not to use this clause. Advice should be sought from legal advisors for
clarification of the use and the intention of these wordings. The IUA does not accept any
responsibility     for  the    subsequent       interpretation  of    the    clauses/wordings.
Comments/guidance notes are included purely for information purposes only.




                                                  4
                                 International Underwriting Association
                           3 Minster Court, Mincing Lane, London EC3R 7DD
                            Tel 020 7617 4444      Facsimile 020 7617 4440
    G510: RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE (without write back)

This clause shall be paramount and shall override anything contained in this
re/insurance inconsistent therewith

In no case shall this re/insurance cover:

1       property eligible for insurance by the relevant local Nuclear Insurance Pool and/or
        Association; or

2       loss, damage, liability or expense directly or indirectly caused by or contributed to
        by or arising from:
        a.     ionising radiation from or contamination by radioactivity from any nuclear fuel
               or from any nuclear waste or from the combustion of nuclear fuel;

        b.    the radioactive, toxic, explosive or other hazardous or contaminating
              properties of any nuclear installation, reactor or other nuclear assembly or
              nuclear component thereof;

        c.    any weapon or device employing atomic or nuclear fission and/or fusion or
              other like reaction or radioactive force or matter;

        d.    the radioactive, toxic, explosive or other hazardous or contaminating
              properties of any radioactive matter.

[* OPTIONAL WRITE BACK]
3      [Notwithstanding section 2 above, cover is provided hereunder in respect of the
       following exposures:]*


G510
October 2008

Commentary

The first of the new clauses, G510, is intended to be used on property treaty business to
provide a total exclusion for all losses involving radioactive contamination. This clause is
based on CL356a, and is intended to provide a total exclusion of all potential losses arising
from radioactive contamination, including those excluded by NMA1975a. Underwriters
might therefore decide to use this clause in place of NMA1975a/G52, although it must be
understood that G510 provides a total exclusion, whereas NMA1975a/G52 does not.
Should an underwriter not want to include a total exclusion, however, the Working Party
has provided an optional limb to G510 which enables an underwriter to write back risks,
which can be agreed on a case by case basis with the re/insured. Alternatively,
underwriters might wish to use the second of the WP’s new clauses, G511.




                                                  5
                                 International Underwriting Association
                           3 Minster Court, Mincing Lane, London EC3R 7DD
                            Tel 020 7617 4444      Facsimile 020 7617 4440
    G511: RADIOACTIVE CONTAMINATION EXCLUSION CLAUSE (with write back)

This clause shall be paramount and shall override anything contained in this
re/insurance inconsistent therewith

In no case shall this re/insurance cover:

1      property eligible for insurance by the relevant local Nuclear Insurance Pool and/or
       Association; or

2      loss, damage, liability or expense directly or indirectly caused by or contributed to
       by or arising from:

       a.     ionising radiation from or contamination by radioactivity from any nuclear fuel
              or from any nuclear waste or from the combustion of nuclear fuel;

       b.     the radioactive, toxic, explosive or other hazardous or contaminating
              properties of any nuclear installation, reactor or other nuclear assembly or
              nuclear component thereof;

       c.     any weapon or device employing atomic or nuclear fission and/or fusion or
              other like reaction or radioactive force or matter;

       d.     the radioactive, toxic, explosive or other hazardous or contaminating
              properties of any radioactive matter.

        The exclusion in this sub-clause d. does not extend to radioactive isotopes, other
        than nuclear fuel or nuclear waste, when such isotopes are on the property insured
        and are being prepared, stored or used in the normal course of operations by the
        insured for the commercial, agricultural, medical, scientific or other similar peaceful
        purposes for which they were intended.

[* OPTIONAL WRITE BACK]
3      [Notwithstanding section 2 above, cover is provided hereunder in respect of the
       following exposures:]*

G511
October 2008

Commentary

G511 is identical to G510, but with an additional paragraph included (2.4), which provides a
write back for losses associated with the peaceful use of nuclear materials e.g. x-ray
machines, pacemakers, etc. This is again based on CL356a but the final limb has been
clarified to address the issues raised by the Working Party regarding the word ‘used’ in the
original clause. This clause clarifies that isotopes are written back only to the extent that
they are prepared, stored or used by the insured in the normal course of operations. By
limiting the write back to the normal course of operations the clause ensures that should
the material be stolen in whatever form, losses arising from their use thereafter shall be
excluded. It should also be noted that the clause is limited to the preparation, storage and
use on the insured’s property and no longer covers the transport of nuclear radioactive
isotopes. Additionally, the WP has again provided an optional limb to this clause which
enables an underwriter to write back any additional potential losses, which can be agreed
on a case by case basis. For example, currently G510 would only cover the transport of
radioactive materials on the property of the insured and therefore transport on public
highways would be excluded. However, should the re/insured want this cover, and the
underwriter is willing to offer it, this can be catered for in this optional write back.
                                                  6
                                 International Underwriting Association
                           3 Minster Court, Mincing Lane, London EC3R 7DD
                            Tel 020 7617 4444      Facsimile 020 7617 4440

				
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