Thank you, Mr. Chairman.
My name is Dermot Murphy. I manage the Nuclear Insurance Association of Canada, also known as NIAC.
As Chairman Tonks pointed out, I'm joined today by Colleen DeMerchant, the assistant manager, and John Walker, of Walker Sorensen, our legal counsel.
As advised when last we met with the committee, NIAC was established in 1958 in response to the need to provide adequate insurance coverage arising from the peaceful development of nuclear power in Canada. NIAC provides statutory coverage to nuclear power operators and others, as required by Canada's Nuclear Liability Act, of up to $75 million Canadian.
NIAC is a pool of property casualty insurers who operate in Canada. Each insurer who is a member of NIAC insures a percentage of the policy limit. It is important to note that insurers provide highly secure protection. Each member of NIAC is regulated by the Canadian office of the Office of the Superintendent of Financial Institutions, known as OSFI, which requires insurance to be very well capitalized indeed. NIAC insurers have a combined $10 billion in capital, approximately, which relates to a hundred times the current limit of the operators' nuclear liability policy.
A pool is a mechanism whereby a number of insurers agree to appoint a common agent to underwrite, jointly, a particular risk or class of business. It is commonly used when the risks needing insurance are few in number, require a spread of risk, or present some particularly hazardous exposure that would otherwise be impossible to insure.
Insurance is a true risk-transfer mechanism that has proven to be cost-effective, but more importantly, does not impact upon nuclear power operators' balance sheets at the time of loss.
We've observed that one of the main questions raised in the speeches during the second reading of Bill C-20 is whether $650 million Canadian is an appropriate limit on operator liability. The issue of the appropriateness of the limit of liability and the issue of how much the amount of insurance each operator should be required to purchase can be seen as independent issues. However, it would not seem appropriate to require operators to purchase more liability insurance than is available in the nuclear insurance market.
In our appearance before the committee last time, we advised the committee that the insurance market could provide $650 million Canadian in capacity. I am now pleased to report that it appears likely, barring any unforeseen events, that the nuclear insurance market will be able to provide $1 billion Canadian in capacity.
A question we are frequently asked is exactly how much nuclear liability insurance costs. Currently, for a $75 million limit, the approximate cost is $200,000 Canadian per nuclear reactor. This, by the way, is the equivalent of the cost of insuring approximately 130 automobiles in Ontario that have full coverage and limits of $1 million.
Previously we advised this committee that the cost of providing the $650 million limit, which is about nine times the existing level, would be approximately four to six times the cost of providing the $75 million limit. We estimate that the cost of providing the $1 billion limit, which is 13 times the current limit, may be approximately in the five to eight times range as compared to the cost of providing the existing $75 million limit.
We very much appreciate this opportunity to discuss nuclear insurance with this committee, and we welcome any questions in due course.
Thank you, Mr. Chair.