[Recorded by Electronic Apparatus]
Thursday, November 28, 1996
.1001 
[English]
The Chairman: Are we all set, everybody? Let's begin.
And now we're official. That's wonderful, Mr. Byrne.
A voice: Mr. Quorum.
The Chairman: Mr. Quorum, yes.
Just for the information of Mr. Byrne and Mr. Keyes - and Mr. Keyes, your office called me this morning - I talked to the whip's office, and there will indeed be a vote this morning, but the timing of it is such that I believe we will be able to get the testimony from both witnesses and still make it over. Certainly we'll get the first witness.
This is our 43rd meeting, and we're meeting on Bill C-58, an act to amend the Canada Shipping Act.
From the Canadian Board of Marine Underwriters, we are meeting now Mr. Jaques and Mr. McRae.
Gentlemen, please take about ten minutes for your remarks to give members an opportunity to question. Please begin.
Mr. Maurice S.L. Jaques (Past President, Canadian Board of Marine Underwriters): Thank you, Mr. Chairman and members, for the invitation to our board to allow us to express our views on this bill.
In very short summary, we're coming here with a very positive feeling in that we are generally supportive of the proposed legislation.
Let me just tell you a little bit about who we are. The Canadian Board of Marine Underwriters is an association that was founded in 1917, so we've been going a number of years. Along with a sister association in British Columbia, we basically represent the marine insurers in Canada - the Canadian marine insurance market.
We have an association that meets on a very regular basis. In particular we're interested in trade policy, in legislative matters and in loss prevention work. We're active and we do, as I say, represent the marine insurance market in Canada.
You'll recognize that marine insurance is an international business. Approximately 50% of the business is written in our domestic market and the balance is in the American markets and overseas. As an aside, you have to recognize this is a totally free trade business in that there are no barriers to prevent people from placing insurance here in Canada or overseas in whatever area they wish.
The way it develops in the marine liability field, which is where we are now, is that the smaller liabilities of up to, say, $10 million can be placed quite easily in the Canadian market with Canadian insurers, but above that and of course relating to much larger vessels, it's placed in what are called P and I clubs.
The principal world market for liability insurance for large vessels, which is called protection and indemnity insurance, is a series of mutual associations known as protection and indemnity mutual associations, better known as P and I clubs. The largest P and I clubs are grouped in an umbrella association known as the International Group of Protection and Indemnity Associations. By pooling their capacity, which includes the assets of shipowning members, and through reinsurance that's available to them, they can provide an estimated $4 billion of capacity for an individual claim.
So you can see that with the relatively smaller capacity of the Canadian market, what we are left with here are smaller vessels, smaller passenger vessels and pleasure craft. The larger ships and their liabilities are placed in these P and I clubs, which are basically a worldwide insurance market.
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Now I'll pass it to my colleague, Mr. McRae, for some other general comments.
Mr. N. Douglas McRae (Chairman, Legislative Committee, Canadian Board of Marine Underwriters): The principle of limitation of liability is already established in the Canada Shipping Act. The major problem we've experienced over the years is the difficulty of settling liability claims within the limitations set forth in the current provisions of the CSA.
The new bill will allow for much higher limits of liability and will make it much easier to settle liability claims within the limitations of the bill and within the limitations of the CSA. Therefore we expect to be able to settle claims more rapidly at a much lower cost. Claimants will wait much less time for their money and the costs of litigation and lawyers' fees will be much lower. So we're very much in favour of it.
We also think it's a very attractive feature that this will bring Canada into harmony with the international convention, the 1976 LLMC convention and its recent 1996 protocol. One of our association's aims is to promote international harmonization of liability regimes for vessels so they all operate within the same framework, because it reduces costs, makes things more certain and is generally very positive.
I'll pass it back to Maurice.
Mr. Jaques: No doubt you all have the paper we're summarizing here before you. It's not very long, so we hope you'll take some time to study it. I'm on page 3, which deals with the capacity of the Canadian market. I've touched on that, and in view of the time constraints, I just would refer you to page 3. It does summarize the projected limits of liability that would be required when this bill is passed into legislation. You can read that at your leisure.
I might just comment on pleasure craft, which probably touches on a much wider scale and a much broader number of people across this country, because there's a huge number of them.
I would remind people that some pleasure craft business is placed with homeowner's insurance, as it's called. Not all of it is placed in what we call the marine market. So it is going to take some time to advise the constituency, the clientele, of these changes of liability and to arrange for insurers to provide the necessary coverage. But as far as pleasure craft are concerned, we do not anticipate that the increased liability, which will require a limit of $1.5 million but probably will be rounded out to $2 million as a limit of liability in an insurance policy, will present any difficulty.
What everybody always wants to know about insurance is what happens with the premiums. I'm happy to report that at the moment we do not foresee a significant change to premiums charged for liability protection to Canadian shipowners as a result of this bill. While the limits are very significantly higher, which may result in higher claims in some cases, the settlement costs could be substantially less.
If over the longer term claims increase due to higher settlements, obviously the costs of insurance will rise. Shipowners may seek to purchase higher limits of liability under their insurance to meet the new limits, but the cost of these increased limits should not be higher than it is now for higher limits.
I'm saying the premium does not increase, that is, the rating is not increasing, but there may be a feeling among shipowners and in particular pleasure craft operators that they should have higher limits. Therefore there is an increased cost for buying the higher limit.
I will pass it back to Mr. McRae.
Mr. McRae: I'll just add a couple of miscellaneous comments.
We were very happy to see the new amending provision in proposed section 579, which allows for an Order in Council to change it. That should make future changes in the international convention easy to adopt in Canadian law. Also, the interest rate provision in proposed subsection 581(5) will make it very easy for our friends in the legal community to determine what interest will be due on these settlements and thus make it rather more easy to settle claims.
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We raise some problems we see in the bill. Unfortunately we don't have solutions, nor do we think the bill should be delayed because of the problems, but the major one we see is the lack of a definition of what constitutes a contract of carriage for a passenger.
The bill defines ``passenger'', which triggers a separate regime for limitation of passengers, as a person being carried under a contract of carriage, but absent a definition of what constitutes a contract of carriage, it may not be easy in all circumstances to determine who is a passenger. Compensation would be a difficult one to apply, because people getting on pleasure craft may very often offer to contribute $50 for gas money, and we don't feel it would be right to turn them into commercial passengers merely for paying some money to help with yacht-owners' costs.
The Chairman: Gentlemen, I'm very sorry. I've just been informed by the House that they are taking the vote immediately and that this bell, which is normally the bell calling members to the House, is in fact also the bell calling members to vote. So we will have to adjourn.
Fortunately you'll have a cup of coffee and we'll get members back here as quickly as we can. I'm sorry for the interruption. We just have no control over this.
Mr. Jaques: When would you expect to be back, if I may ask?
The Chairman: There's one vote. If we head over there right now....
Mr. Keyes (Hamilton West): About 15 to 20 minutes.
Mr. Byrne (Humber - St. Barbe - Baie Verte): That's not the half-hour bell?
The Chairman: Apparently they want us now.
Mr. Keyes: Sometimes the whips agree to bring us in earlier.
The Chairman: So we will adjourn, and we will return as expeditiously as we possibly can.
Mr. Jaques: We should wait for you here?
The Chairman: I would appreciate that.
The meeting is adjourned.