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Nuclear Decommissioning Trust Funds: Rethinking the Approach

Fortnightly Magazine - November 15 1996

back in the 1980s, and reportedly found the insurance industry unenthusiastic about underwriting the risk because of a moral hazard pitfall.

Further effort is required to estimate the insurance parameters. The magnitude of any given loss event should be relatively small compared to the underwriting and loss absorption capacity of the property/liability insurance industry. Various institutional arrangements like the insurance pools that have been developed for nuclear power will likely provide instructive precedents. The NRC's April 8 Federal Register notice seems to indicate that it will encourage putting some new assurance mechanism in place. t

Donald Korn, a chartered financial analyst, heads a management consulting firm, DHK Associates, in Los Altos, CA. The author gratefully acknowledges the helpful comments of Zvi Bodie (Boston University), Geoffry Rothwell (Stanford University), and Jack L. Treynor (president of Tregnor Capital Management, Inc.). Any errors of ommission or commission remain the responsibility of the author.

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