Natural Resources Committee on Dec. 2nd, 2009

[Dave McCauley]

No. What would happen is this. For a small facility, such as a small reactor in a remote community, that operator would go forward and obtain the $650 million worth of insurance, but there would be a certain percentage or a certain amount of private insurance that would be required based on the facility and the parameters of the facility, and then the remainder of that would be reinsured by the federal government.

Are you following me?

[Alan Tonks, Liberal, York South—Weston, ON]

Okay. But I didn't realize, and I'm not sure the committee did, Mr. Chairman, that the small operator would have to make an application for the full $650 million under the act. I thought that by regulation there could be an amount set in terms of reasonable liability.

[Dave McCauley]

Yes. There is provision later in the legislation for the development of regulations, and in those regulations the government is permitted to set an amount of reinsurance for classes of facility or installation. For a very large facility, such as a nuclear reactor, a Darlington, for example, there would be no government reinsurance. They would be expected to get the full $650 million of private insurance from an approved insurer; however, for a smaller facility, such as the reactors that you describe, there would be very significant amounts of reinsurance provided by the government, and those amounts would be established through regulation. So in fact the smaller facilities, such as Slowpoke reactors in universities, etc., the remote reactors you're suggesting, would have to get a very small amount of commercial insurance. A large amount would be reinsured by the federal government pursuant to the regulations.

[Alan Tonks, Liberal, York South—Weston, ON]

I see. Thank you very much.

Thank you, Mr. Chairman.

[The Chair, Conservative, Leon Benoit]

Okay. Shall clause 25 carry?

(Clause 25 agreed to on division)

Now, clause 26 has six New Democrat and one Liberal amendment proposed, so we will stand clause 26 and go to clause 27.

(On clause 27—Continuation of Nuclear Liability Reinsurance Account)

Yes, Mr. Cullen.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I would just like some explanation from our witnesses. We didn't necessarily hear a lot of testimony about the reinsurance component. Can you very briefly explain the justification of clause 27 in terms of this account. Does that account exist now? What does Bill C-20 do to alter it, if it does exist right now?

[Dave McCauley]

It does exist. It's a provision in the existing legislation. I don't know if we have actually changed the wording very much on this, but basically it is an account to which premiums are paid for government reinsurance. It is an account that would be used to pay out to victims in the unlikely event of an incident.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

Okay, but at what point does it pay out to victims? How large an account is this? If it has been in existence for some time, is it many millions? Is it thousands of dollars? Here's my second question on this account, after its size: when does this thing kick in? Does it kick in after the provider's insurance is exhausted, before Parliament seeks more funds, or after Parliament seeks more funds? Am I confusing issues here?

[Dave McCauley]

No. Reinsurance covers a variety of risks. There are certain risks the insurers are unwilling to cover but for which the act provides compensation. That's one form of reinsurance.

There is the reinsurance associated with small facilities such as university research reactors, for which the government accepts a certain amount of liability.

Finally, there would be the reinsurance associated with amounts over and above $650 million should those ever be required in the event of an incident.

The expectation would be that payments of any of those forms would be made out of that nuclear liability reinsurance account.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

This account, by this definition, has been filled over time by the providers themselves?

[Dave McCauley]

That's correct. The government, to this date, has been charging a nominal amount for the reinsurance, and those amounts have been put into the nuclear liability reinsurance account.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

What I'm trying to understand here, Chair, is that between that list of things that you've said require the reinsurance.... I don't really know what this is.

You said they were things that insurance companies were not willing to cover, and the small research reactors, but it's difficult for me as a committee member to understand what that all amounts to. Is this a large field of things? Is it incredibly small?

Then again, to go back to what's sitting in the pot right now and what is estimated by Bill C-20, is it growing at 1% per year? I'm flying a bit blind here. It's not showing what we're actually reinsuring, how much is sitting there in that reinsurance pot, and what happens to these uninsured items if that pot is exhausted.

[Dave McCauley]

When I said some of the risks the insurers are unwilling to cover...for example, I think you had the insurers here as witnesses and they addressed certain environmental damages. This is an area of compensation that insurers are very unwilling to be involved in; in fact, it has kind of confounded bringing into force nuclear liability legislation in other countries.

This would, for example, cover risks beyond 10 years, claims beyond 10 years, because the insurers are only willing to pay claims within a 10-year period. We are suggesting that the period of claims can be extended to 30 years. Those are risks that the government would have to cover because the insurers are unwilling to cover them.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

I'm sorry, but just to be clear on this 10 years, are we talking about environmental damage or damages to individuals?

[Dave McCauley]

The 30-year limitation period--and I think we've covered that area already--addresses bodily injury.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So it's for claims after 30 years.

[Dave McCauley]

After 10 years.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

After 10 years on bodily...?

[Dave McCauley]

Between 10 and 30 years would be compensable through the reinsurance account.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

So this is at the heart of my questions, then, because if somebody comes forward or a group of people comes forward 11 years after the fact with a claim after an accident.... I would imagine that in terms of the contamination and then bodily effects, one can foresee that happening 10 years or 11 years later. The effects might not show up in the next year.

If somebody deems themselves to have developed a form of cancer, let's say, from contamination, we know--and the research did show us--that sometimes it doesn't happen within five years. Sometimes it takes 15 years. Would those claims all fall under this reinsurance liability regime?

[Dave McCauley]

That's correct. Claims made beyond 10 years, relating to bodily injury, would fall under this reinsurance regime, and this is similar to legislation internationally, under which it's up to public funds to provide this additional coverage.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The reason for that is that insurers have a difficult time estimating what that risk actually might be. Is that why?

You said earlier that insurers are unwilling to provide any kind of insurance at all 10 or 30 years after the fact.

[Dave McCauley]

I think there are various considerations related to why the insurers will not provide the coverage.

[Nathan Cullen, NDP, Skeena—Bulkley Valley, BC]

The fact is, though, that they won't.

[Dave McCauley]

That's right.