Natural Resources Committee on Dec. 4th, 2007

[Dave McCauley]

Yes, I do. If there were more competition in the industry, premiums would perhaps go down and there would be other forms of insurance and financial securities. That would cause premiums to go down, because if there were a number of insurers, there would be more competition.

[Claude DeBellefeuille, Bloc, Beauharnois—Salaberry, QC]

If I understand correctly, the government proposes to let NIAC keep cornering the market with this subsection.

[Dave McCauley]

No, not NIAC. The insurance industry. Up to now, NIAC has cornered the market, but other companies can offer operators their services.

[The Chair, Conservative, Leon Benoit]

Mr. Harris.

[Dick Harris, Conservative, Cariboo—Prince George, BC]

Thank you.

Madame DeBellefeuille, eliminating this clause would mean that the operators, the facilities, could choose to simply self-insure against any accident. In that case, if there were to be a significant amount of damage in an accident that could in fact cost up to $650 million and if the facility, rather than paying insurance premiums, had opted to simply self-insure, it could in fact financially destroy the facility if they became liable for $500 million to $600 million in compensation, and then we would have two problems: we'd not only have an accident, but we'd also have a nuclear facility that was bankrupt. In that case, an attempt to reactivate the facility would impose a huge cost on the consumers of that form of power.

That's certainly the major downside to eliminating that clause. The other thing, Madame DeBellefeuille, is that of course we would all like to see a huge lineup of companies wanting to insure the nuclear facility, but the fact is that apart from NIAC and the insurance companies that are already there, the other line is empty. There's no one else in that line wanting to get into the business of insuring nuclear facilities. Otherwise I'm sure NIAC and the insurers that are there would love to have them, in order to spread the risk out a little more than it is.

Eliminating so that others could come into the insuring business simply wouldn't bring a horde of people, believe me. It's not likely to bring any; if there were others out there, they would be there now. Nothing precludes them from making application to become part of the NIAC group or other insurance.

Is that correct?

[Dave McCauley]

That's correct.

[The Chair, Conservative, Leon Benoit]

Thank you.

Mr. Alghabra is next.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Thank you, Mr. Chair.

I want to get back to a question that I started asking on Thursday when we started doing the clause-by-clause study at the beginning. You started touching upon it, Mr. McCauley. It was about how insurance works for this industry.

I'm trying to understand what NIAC really is. When they were here, they said they're just an association of insurance companies that insure nuclear reactors. On the other hand, in their description of who they are, they said they're the only insurer. So are they the insurer, or are they just an association of insurance companies that provide the insurance? Is it self-regulating? Who regulates NIAC or its members? How does one become a member of NIAC?

To be honest with you, all these questions are still unanswered in my mind. I'm just trying to understand the industry and see if there are issues of the market's own dynamics or whether there are some regulations that are restricting the industry.

I know it's quite a broad question, but that's how much I need to really understand about this business.

[The Chair, Conservative, Leon Benoit]

Who would like to answer that?

Go ahead, Mr. McCauley.

[Dave McCauley]

Sure. I'll do my best.

NIAC represents a number of Canadian private insurers. They, along with the British insurers and the American nuclear insurance company, have joined together to become approved insurers under the Nuclear Liability Act. They have brought their capacities together, those three pools--the American pool, the British pool, and the Canadian pool--and have brought their money to the table in order to provide the insurance to Canadian operators under the Nuclear Liability Act.

NIAC is the organization that represents those pools in any discussions we have. They have been approved by the minister under the Nuclear Liability Act to provide that insurance.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

But they're not the underwriters, are they? Technically they're not the insurers, are they? Aren't the insurers the 21 members that NIAC has?

[Dave McCauley]

That's right. The companies that are members of NIAC and the other pools that are involved are the actual underwriters.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

NIAC is approved, but they're not really the insurers. That is where the disconnect is for me.

[Dave McCauley]

NIAC represents these insurance companies.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

As a collective, not as individual companies--is that correct?

[Dave McCauley]

That's correct.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

Then we still end up with the individual companies providing the insurance and not the collective.

[Dave McCauley]

We have an agreement with NIAC to provide the insurance. As NIAC comes to the table, they're bringing all of these insurance companies.

[Omar Alghabra, Liberal, Mississauga—Erindale, ON]

I'll go back to my question. The insurer is the individual company that is a member of NIAC, not the collective.

[The Chair, Conservative, Leon Benoit]

This will be the final question and then we'll come back to this on Thursday.

Go ahead, Mr. McCauley.

[Dave McCauley]

Each of the insurance companies has a percentage of the $75 million that they are insuring.

[The Chair, Conservative, Leon Benoit]

We are out of time. We have another committee waiting. We'll come back Thursday and continue with the Bloc amendment and with the rest of the clause-by-clause.

The meeting is adjourned.