Natural Resources Committee on Nov. 18th, 2009

[Geoff Regan, Liberal, Halifax West, NS]

There was a suggestion from the witness, who was on by teleconference in the first session, that in his view if this bill passed, it, or the existing law, would be struck aside in the event of an accident on the basis of security to the person. Under the charter, someone who was claiming the level was too low and was seeking to exceed that level of damages, perhaps in a class action suit, could set aside this law. Do you have a view on that?

[John Walker]

I know I'm a lawyer, but unfortunately I have not examined that issue.

[Geoff Regan, Liberal, Halifax West, NS]

Has your colleague?

[Colleen DeMerchant, Assistant Manager, Nuclear Insurance Association of Canada]

No.

[Geoff Regan, Liberal, Halifax West, NS]

I see. Okay, sorry.

We've heard from some people that the bill should allow operators to go outside Canada to find insurers and not be tied down with a single insurer.

Mr. Murphy, do you have any views on this?

[Dermot Murphy]

Thank you, Mr. Regan.

NIAC was appointed as an approved insurer many, many years ago with respect to the liability coverage. As I mentioned earlier in my comments, every insurer, as a member of NIAC, and other nuclear insuring pools meet the stringent financial requirements of their insurance regulators. One would assume that the same level of financial scrutiny would be used to assess any new insurer applying to become an approved insurer in Canada.

[Geoff Regan, Liberal, Halifax West, NS]

All right.

Can you give the committee an idea of what you insure and do not insure? For example, I understand that the industry does not insure things like psychological trauma and that in the case of an accident it would fall to the Government of Canada by default. Is that accurate? Can you elaborate on what you do and do not insure?

[Dermot Murphy]

I'll defer to Mr. John Walker, if I may.

[Geoff Regan, Liberal, Halifax West, NS]

That is a good question for the lawyers.

[John Walker]

Yes, there is a possibility. The insurers have indicated a reluctance to insure psychological trauma and claims that are brought against the operator after 10 years but before the 30-year prescription period has expired.

Insurers, however, are working very hard behind the scenes to try to find a way to insure the exposure for psychological trauma. It does not look as if insurers will be prepared, at this time, to insure claims that arise after 10 years. Those would have to be re-insured by the federal government under what's called Coverage B under the policy that's issued to the operators.

[Geoff Regan, Liberal, Halifax West, NS]

Thank you.

Mr. Murphy or Mr. Walker, can you explain how terrorist threats have impacted your business of insuring this industry? I'm thinking, for example, of the fact that we have the Pickering reactor, which is close to Toronto, and it was reported that the so-called Toronto 18 were in fact targeting that plant. I guess the question is how this relatively new risk has impacted your industry when you're looking at how you're going to try to insure these end operators. And what liability would arise from an attack versus an accident?

[Dermot Murphy]

If I may, Mr. Chairman, in the aftermath of the World Trade Centre attack, the availability of insurance coverage for terrorism simply evaporated. It was no longer available. Since then, in the absence of any significant terrorism act involving nuclear facilities, certainly, the market appetite has come back and we are in a position to provide a limited amount of terrorism coverage.

At the present time, NIAC insures 20% of the required terrorism coverage and the government picks up the balance.

[The Vice-Chair, Liberal, Alan Tonks]

Mr. Murphy, I'm going to have to interject at this point because we won't get everybody in if I don't bring this to a conclusion. Thank you for that answer.

Thank you, Mr. Regan.

Madame Brunelle.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you, Mr. Chair.

Mr. Heysel, I am happy that my colleague asked you this question. Last time we met, it was on the subject of isotope production and we found your proposal interesting. If I understand this correctly, you are still waiting for an answer to the proposal you submitted to the government for the production of isotopes.

[Christopher Heysel]

Yes, that's correct. We were invited to submit our proposal that we'd discussed formally to the expert panel in July. It's my understanding that they're reviewing our proposal, along with the 20 other proposals, and are to report back to the government this month.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

You are talking about 20 other proposals. Then it means that we are not lacking solutions in Canada. It is good to know.

You told us that non-profit reactors have their liability limited to $250,000. However, McMaster is not a non-profit reactor as it must be self-financing.

[Christopher Heysel]

Yes, I'd consider our reactor to be non-profit. There aren't any shareholders. Any funding we're able to generate through providing services and products helps offset the costs, and the university would make up the additional costs to make our budget balance. So I consider ourselves the exact same configuration that a U.S. reactor would be—a non-profit entity.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Then the liability should be limited to $250,000. This is what you are saying?

[Christopher Heysel]

I believe that would be the right amount to put us on the same playing field as our U.S. counterparts, yes.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

Mr. Murphy, several of our witnesses have suggested, like Mr. Carroll today, that the liability level is too low compared to international standards. There was a reference to the OECD's Paris Convention, which I am not familiar with, unfortunately. What is your view about it?

As an insurer, I suppose that if you have set a limit of $650 million, there was a reason for it. We were given some idea of the costs, which seem very high to me, that will follow an increase of the limit.

What could you say to those who are suggesting that the liability limit is too low in Bill C-20?

[Dermot Murphy]

I'd like to cast my response in the context of the insured limit. I do not necessarily agree with the witness from Sweden. At $650 million Canadian, we are well positioned in comparison with other jurisdictions. I'd like to share with you and place in context some of these other limits of liability. In the U.S., the insured limit is $300 million U.S. I am in possession of information that they may be considering bringing that to $375 million U.S. In the United Kingdom, the limit of liability insured is £140 million or $248 million Canadian, which is considerably lower than our proposed $650 million. You've heard from the witness from Sweden the levels of insurance covered there. In Germany the insured limit is €260 million, about $400 million Canadian. Yes, they do have a mutual agreement beyond that.

A lot of times, because of our proximity to the United States, people compare Canada and the U.S. and ask how they can muster over $11 billion of “capacity”. They are not differentiating between the insured limit, which is the business that NIAC is in, and the unfunded pooling mechanism that they have. Not to elaborate too much, but the formula in the United States requires that an amount of $112 million be paid per reactor. There are 104 reactors in the U.S.; hence the additional coverage of $11 billion. This is an unfunded pool. The levies would have to be charged after the occurrence of a very significant nuclear incident. They have a seven-year period to pay into this amount.

So in answer to your question, Madam, and some of the comments made by other persons giving testimony, the $650 million limit is not inadequate when compared with that of some of the major western countries.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Thank you.

Do I have some time left?

[The Vice-Chair, Liberal, Alan Tonks]

You have one minute.

[Paule Brunelle, Bloc, Trois-Rivières, QC]

Insurers take into account the level of risk. Would it be possible, for instance, to have higher safety norms so that the cost of insurance might be less? Is that a possibility or is it impossible in the nuclear industry?

[Dermot Murphy]

I have said on many occasions that I am not aware of any industry in the world that is more heavily regulated, with any higher safety norms, with any more extensive training and commitment to safety and the protection of persons and property than the nuclear operators insurance environment.