Nuclear Insurance “De-Dollarization”: A Critical Step for China’s Nuclear Power Insurance Industry
Summary of Key Points
In simple terms, China’s nuclear power industry has achieved a significant “indigenization” upgrade in the insurance sector. On September 10th, China General Nuclear Power Group (CGNPG) signed a new insurance agreement, which means that the operation insurance for China’s nuclear power plants will no longer be priced and settled in dollars, as has been the case for over the past 30 years, but will now officially use the RMB.
This is more than just a change in currency; it signifies that China is no longer passively accepting the “pricing power” of the international insurance market. China has developed its own pricing model based on domestic nuclear power data, making insurance premiums more in line with the actual risks faced domestically. This move breaks away from the long-standing practice of relying on foreign currency transactions, not only helping domestic nuclear power companies avoid the risks of exchange rate fluctuations but also establishing the RMB as a strong currency in the highly specialized field of international nuclear insurance, even prompting several countries’ insurance companies to open RMB accounts.
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Detailed Explanation
1. What is nuclear insurance, and why is it so “special”?
First, let’s understand what nuclear insurance is. It can be considered the “super talisman” for nuclear power plants. In the event of an accident at a nuclear power plant, the consequences could be unimaginable, with compensation amounts potentially reaching trillions of yuan. Therefore, the value of a single nuclear insurance policy is enormous, often amounting to hundreds of billions or even trillions of yuan. Due to the high risks and large amounts involved, no single insurance company dares to assume the entire risk; instead, hundreds of insurance companies around the world must jointly underwrite such policies.
This makes nuclear insurance one of the most complex and specialized types of insurance. It’s not just about buying insurance; it represents the深度融合 of modern risk management expertise with cutting-edge nuclear technology. In the past, because China’s nuclear power industry started relatively late, this field was dominated by international giants, who set the rules and used their currency (the dollar) for all transactions.
2. Have we been “accepting everything as it was” for the past 30 years?
Yes, since the issuance of China’s first nuclear power plant operation insurance policy (for the Daya Bay Nuclear Power Plant) in 1993, the Chinese nuclear power industry has followed foreign models. It’s like buying a house abroad: although the house is yours, how the price is set, in what currency it is paid, and how the interest is calculated are all determined by foreign intermediaries. In the past, the pricing standards, actuarial models, and transaction settlements for Chinese nuclear insurance all relied on the international market and were denominated in dollars.
He Haibin, the chief accountant of CGNPG, put it bluntly: “In the past, the international market set the prices, and we had to accept them.” This meant that even if Chinese nuclear power plants operated safely with low risks, China still had to pay high premiums according to international standards, bearing the risk of exchange rate fluctuations. If the dollar appreciated, China’s insurance costs would increase unexpectedly, which was detrimental to business operations.
3. The core of this breakthrough: We now have our own “calculations”
The biggest highlight of this breakthrough is not just the change in currency but the fact that we now have our own pricing model. Starting in 2023, CGNPG, in collaboration with the Chinese Nuclear Insurance Community, developed an “autonomous pricing model.” What makes this model powerful? It incorporates a large amount of domestic data:
- Equipment reliability: How stable are the equipment manufactured in China?
- Operational performance of personnel: What is the skill level of Chinese workers?
- Local emergency response capabilities: How fast are the local rescue teams in responding to incidents?
- Regional risk characteristics: What are the geological and climatic risks in different areas?
These factors were previously either overlooked or given low weight in international actuarial calculations, but now they are taken into account. As a result, the insurance premiums are no longer a one-size-fits-all “international price” but a “local price” that better reflects the actual risks of Chinese nuclear power plants.
In simple terms, it used to be that “if others think your risk is high, you have to pay more”; now, “we calculate the risk ourselves and pay accordingly.” This not only demonstrates professionalism but also asserts China’s right to speak in this field.
4. RMB settlement: Keeping money in “our own pocket”
This agreement covers CGNPG’s 8 bases and 33 nuclear units, with a coverage amount of over 210 billion yuan. The most significant change is that premiums are collected and claims are paid in RMB. This brings two direct benefits:
1. Avoiding exchange rate risks: In the past, if the dollar appreciated, Chinese nuclear power companies had to spend more RMB to convert for premium payments. With RMB-based settlements, exchange rate fluctuations no longer affect insurance costs, making business operations more stable.
2. Fund safety and efficiency: Funds are circulated within the domestic currency system, reducing the hassle and potential risks of cross-border conversions and improving the efficiency of fund usage.
More importantly, this is not just a matter for CGNPG alone. The signing of this agreement provides a “path forward” for other domestic nuclear power operators (such as China National Nuclear Corporation and Huaneng) to implement cross-border insurance settlements in their own currency. This is a “stepping stone” that could lead to the gradual shift of the entire Chinese nuclear power industry’s insurance to RMB settlements in the future.
5. International reaction and China’s confidence in its nuclear power industry
You might ask: Are international insurance companies willing to cooperate? The answer is: Yes, and they are very enthusiastic. It has been reported that nuclear insurance communities from six countries have specifically opened RMB accounts, and another ten countries have enabled RMB cross-border settlement services. This shows that as China’s nuclear power industry expands, the international insurance market must take the RMB into consideration.
The reason for international interest is that China’s nuclear power industry is strong. Data shows that during the 14th Five-Year Plan period, 46 new nuclear power units were approved nationwide. Currently, there are 120 nuclear power units in operation, under construction, or awaiting approval on the Chinese mainland, with an installed capacity of 135 million kilowatts, and the scale of new construction has ranked first in the world for several years.
The industry is the foundation of insurance. The more developed, safe, and scaled-up China’s nuclear power industry becomes, the larger the nuclear insurance market will be. When China becomes one of the largest nuclear power markets in the world, using the RMB for pricing and settlement is no longer a privilege but a natural outcome of market evolution.
Conclusion
On the surface, the agreement signed by CGNPG appears to be about changing the currency for insurance settlements, but in reality, it represents an increase in China’s financial influence in the high-end energy sector:
- For companies: It reduces costs and avoids exchange rate risks.
- For the industry: It establishes autonomous pricing standards and reduces dependence on external rules.
- For the country: It promotes the internationalization of the RMB in a specific professional field, showcasing the strength and confidence of China’s nuclear power industry.
This marks a shift for China in the nuclear insurance sector from being a “follower” to a “rule participant” and even a “leader.” As more nuclear power projects are implemented, the influence of the RMB in nuclear insurance and the broader energy finance sector will only grow.