Contingent liabilities

Public Accounts of Canada 2023 Volume I—Top of the page Navigation

The contingent liabilities of the government are grouped into: guarantees provided by the government, international organizations, pending and threatened litigation and other claims, assessed taxes under appeal and insurance programs of agent enterprise Crown corporations. Additional information regarding each category is provided below.

For details of contingent liabilities of consolidated Crown corporations, refer to Table 4.4 in Section 4 of this volume. Particulars of contingent liabilities of enterprise Crown corporations and other government business enterprises are not consolidated with those of the government but details of these contingencies may be found in Table 9.7 of Section 9 of this volume.

Guarantees

Losses on guarantees are recorded in the accounts when it is likely that a payment will be made to honour a guarantee and when the amount of the anticipated loss can be reasonably estimated. The amount of the allowance is determined by taking into consideration the nature of the guarantee, loss experience and the use of other measurement techniques. Borrowings of enterprise Crown corporations and other government business enterprises are recorded as liabilities for the portion not expected to be repaid directly by these corporations.

Table 11.6 lists the outstanding guarantees and is summarized in Note 8 to the consolidated financial statements in Section 2 of this volume. The authorized limits indicated in Table 11.6 represent the aggregate total of various types of authorities of government bodies as stipulated in legislation, legal agreements or other documents that may be in force at any one time.

**Table 11.6**
**Guarantees provided by the government as at March 31, 2023**
(in millions of dollars)
Guaranteed borrowings of enterprise Crown corporations and other government business enterprises
	Authorized limit (where applicable)	Principal amount outstanding
Agent enterprise Crown corporations		317,834^{Link to table note 1}
Other guarantees provided by the government
Loan guarantees
Agriculture and Agri-Food
Department of Agriculture and Agri-Food
Advance Payments Program—Agricultural Marketing Programs Act	7,500	1,436
Loans to farmers under the Canadian Agricultural Loans Act	3,000	79
Employment, Workforce Development and Disability Inclusion
Department of Employment and Social Development
Canada Student Loans Act	10,782	–^{Link to table note 2}
Finance
Department of Finance
European Bank for Reconstruction and Development	53	53
International Bank for Reconstruction and Development	159	159
Global Affairs
Export Development Canada—Canada Account
Canada Development Investment Corporation—Trans Mountain Corporation	11,500	9,646 ^{Link to table note 1}
Indigenous Services
Department of Indigenous Services
Indian Economic Development Guarantee Program	60	–^{Link to table note 2}
On-Reserve Housing Guarantee Program	2,200
Canada Mortgage and Housing Corporation		1,655
Other approved lenders		286
Innovation, Science and Industry
Department of Industry
Canada Small Business Financing Act	4,063	1,137
College of Patent Agents and Trademark Agents	1	–
Natural Resources
Department of Natural Resources
Lower Churchill Hydro Electric Projects	10,200	8,892
Total—Loan guarantees	49,518	23,343
Insurance programs managed by the government
Canadian Heritage
Department of Canadian Heritage
Canada Travelling Exhibitions Indemnification Act	3,000	–
Finance
Department of Finance
Mortgage or Hypothecary Insurance Protection	350,000	261,211
Natural Resources
Department of Natural Resources
Nuclear Liability Account	–	–
Total—Insurance programs managed by the government	353,000	261,211
Other explicit guarantees
Agriculture and Agri-Food
Department of Agriculture and Agri-Food
Price Pooling Program—Agricultural Marketing Programs Act	–	–
Total—Other explicit guarantees	–	–
Total—Gross guarantees	402,518	602,388
Less: allowance for guarantees		473
Net exposure under guarantees		601,915
Table 11.6 notes General notes: This table excludes insurance programs operated by agent enterprise Crown corporations. Information on these programs is disclosed in Note 8 to the consolidated financial statements in Section 2 of this volume and additional information is provided in Table 11.8 of this section. The dash means that the amount is 0 or is rounded to 0. A blank cell means there is no available data. Table note 1 Details can be found in Table 9.5, Section 9 of this volume. Return to table note 1 referrer Table note 2 Less than $500,000 Return to table note 2 referrer

Advance Payments Program—Agricultural Marketing Programs Act

The Advance Payments Program (APP) is a federal loan guarantee program which provides producers with access to cash advances over their production and marketing period. The cash advances are based on the anticipated value of the eligible agricultural products being produced or that are in storage. The program is administered by participating producer organizations (APP administrators) and the federal guarantee helps these organizations obtain financing for the cash advances at lower interest rates.

Under the APP, a producer can obtain a cash advance of up to $1.0 million. While the federal government typically pays the interest on the first $100,000, the interest-free limit has been increased to $250,000 for the 2022 program year (and to $350,000 for the 2023 program year). Producers are required to repay their advances as they sell their products, with up to 18 months to fully repay advances on most agricultural products (up to 24 months on cattle and bison). By improving producers’ cash flow throughout the year, the APP helps crop and livestock producers meet their financial obligations and benefit from the best market conditions.

Loans to farmers under the Canadian Agricultural Loans Act

The Canadian Agricultural Loans Act (CALA) program is a financial loan guarantee program that gives farmers easier access to credit. Farmers can use these loans to establish, improve, and develop farms; while Agricultural co-operatives may also access loans to process, distribute, or market the products of farming. Lenders, such as banks, credit unions and caisses populaires, issue and administer loans under the CALA program.

Through the CALA, the Government of Canada is supporting the renewal of the agricultural sector and enabling co-operatives to better seize market opportunities. This program guarantees 95% of the value of loans provided to farms and cooperatives by financial institutions. For individual applicants, including corporations, the maximum amount for a CALA loan is $500,000. Most loans are repayable within ten years; for loans on land purchases, the repayment period is 15 years.

Canada Student Loans Act

Loans provided by financial institutions between 1964 and August 1995, under the Canada Student Loans Act, are fully guaranteed by the Department of Employment and Social Development (ESDC) to the lenders. ESDC reimburses the lenders for the outstanding principal, accrued interest and costs in the event of default, permanent disability or death of the borrower. ESDC bears all risks associated with guaranteed loans.

European Bank for Reconstruction and Development

Pursuant to section 8.3(3)b of the Bretton Woods and Related Agreements Act, the Minister of Finance, by order of the Governor in Council, authorized a partial loan guarantee in the amount of €36.5 million EUR to the European Bank for Reconstruction and Development (EBRD) in respect of a €300 million EUR credit facility entered into between the EBRD and Naftogaz, Ukraine’s state owned oil and gas company. The EBRD credit facility to Naftogaz also carries a full guarantee from the Government of Ukraine.

Under the terms of the guarantee agreement, the Government of Canada has guaranteed a pro-rata share of any unpaid amounts by the borrower (interest and principal), up to a fixed aggregate amount of €36.5 million EUR. At this point, no losses are anticipated with respect to this guarantee and no provision has been made.

International Bank for Reconstruction and Development

Pursuant to section 8.3(1) of the Bretton Woods and Related Agreements Act, the Minister of Finance, by order of the Governor in Council, authorized a partial loan guarantee in the amount of $118 million USD to the International Bank for Reconstruction and Development (IBRD) in respect to a $1,443.82 million USD loan entered into between the IBRD and the Republic of Iraq.

Under this guarantee, the Minister would make payment to the IBRD in the event that the Republic of Iraq is more than six months late in meeting a scheduled interest or principal payment to the IBRD. The Minister would only be required to pay a pro-rata share of the loan repayment that is past due, up to a fixed aggregate amount of $118 million USD. In the event that any portion of the guarantee is called, Canada would receive a claim from the IBRD against the Republic of Iraq and would have the option to pursue recovery. At this point, no losses are anticipated with respect to this guarantee and no provision has been made.

Trans Mountain Corporation

On April 25, 2022, the Trans Mountain Corporation (TMC), a wholly owned subsidiary of the Canada Development Investment Corporation, changed its status to a non-agent Crown corporation to allow for borrowings from parties other than the Government of Canada. On April 29, 2022, TMC entered into a one-year senior unsecured revolving facility for $10B with a syndicate of lenders (Syndicated Facility). The Canada Account issued a loan guarantee to TMC on its Syndicated Facility, which matures August 31, 2025, with a total authorized limit of $10B. On March 24, 2023, TMC's Syndicated Facility was amended, and the loan guarantee was revised accordingly to $11.5B. Prior to the amendment, the guarantee fee was 5% per annum less the daily weighted average interest rate per annum payable by TMC in accordance with the Syndicated Facility. The amended guarantee fee is accrued at a fixed rate based on the outstanding balance under the Syndicated Credit Agreement.

Indian Economic Development Guarantee Program

This program authorizes the department to guarantee loans for non-incorporated Indian businesses on a risk-sharing basis with commercial lenders because security restrictions in the Indian Act prevent the mortgage and seizure of property located on reserves. Guarantees are provided for various types of borrowers whose activities contribute to the economic development of Indians and enable them to develop long-term credit relationships with mainstream financial institutions.

Loans issued under this program cannot exceed a term of 15 years and the line of credit must be renewed every year. Interest rates on guaranteed loans are consistent with rates provided by lending institutions to commercial businesses, which are usually based on a spread from the prime lending rate. Any security pledged for a guaranteed loan may not be released by the lending institution without the prior approval of the Minister of Indigenous Services.

On-Reserve Housing Guarantee Program

This program authorizes the Department of Indigenous Services to guarantee loans to individuals and Indian bands to assist in the purchase of housing on reserves because security restrictions in the Indian Act prevent the mortgage and seizure of property located on reserves. These loan guarantees enable status Indians residing on reserves, Band councils, or their delegated authorities, to secure housing loans without giving the lending institution rights to the property.

Loans under this program are issued by registered lending institutions and Canada Mortgage and Housing Corporation. Payments of principal and interest for loans issued under this program are amortized over a period up to 25 years. The interest rates on the guaranteed loans are consistent with conventional mortgage interest rates offered by the major banks. The total guarantee loans amount authorized by the department cannot exceed $2.2 billion.

Canada Small Business Financing Act

The Canada Small Business Financing Act includes loans registered since April 1, 1999. In collaboration with financial institutions, the programs offered under this Act is designed to help Canadian small and medium-sized enterprises (SMEs) get access to loan that would not otherwise have been available or would only have been available under less favourable terms. In the event a registered loan default, the government pays 85% of the net eligible losses. To be eligible, SMEs must be for-profit businesses with revenues not exceeding $10 million per year.

College of Patent and Trademark Agents

The Minister of Innovation, Science and Industry has the authority under section 14(1)(b) of the Department of Industry Act to authorize a loan guarantee to facilitate the implementation of any program or project of the Minister. The College of Patent Agents and Trademark Agents was established in federal legislation in December 2018 to act as the professional regulator for patent agents and trademark agents. The guarantee was provided on a line of credit up to $1,000,000 to support the College’s preparations prior to the full coming into force of its legislation, at which point it would have authority to collect fees.

Lower Churchill Hydroelectric Projects

From 2013 to 2017, the Government of Canada guaranteed a total of $9.2 billion in debt issued to support the construction of the Lower Churchill Hydroelectric Projects, including two projects sponsored by Nalcor Energy ([1] Muskrat Falls and Labrador Transmission Assets and [2] Labrador-Island Link) and one project sponsored by Emera Inc. (Maritime Link).

Interest payments on these bonds began immediately after issuance, occurring every six months on June 1 and December 1 of every year. Principal repayments began in 2020. In some cases, principal repayments are made directly to bondholders every six months; in other cases, the entire principal amount of the bond is repaid on the maturity date – in these cases, funds are gradually set aside every six months to ensure that the full principal amount can be paid on the maturity date.

In March 2022, the Government of Canada issued a subsequent federal loan guarantee for $1 billion in debt. The proceeds of this debt issuance will be used to make principal repayments for the Muskrat Falls and Labrador Transmission Assets project that come due on or before June 1, 2029. Interest payments on this subsequent guarantee began on June 1, 2022 and will occur every six months until the debt is retired. The principal amounts will be repaid beginning on December 1, 2037, with the final payment occurring on June 1, 2057.

Among the many safeguards put in place to protect Canada’s interests, all the project entities’ shares, assets and agreements have been pledged as security to Canada.

The net amount of debt remaining outstanding, having been reduced by both principal repayments to bond holders as well as funds held in escrow for future principal repayments, is $8,891,525,522 as at March 31, 2023.

Canada Travelling Exhibitions Indemnification Act

Pursuant to Section 3(1) of the Canada Travelling Exhibitions Indemnification Act (the Act) the Minister of Canadian Heritage is authorized to enter into indemnification agreements with owners of objects or appurtenances on loan to travelling exhibitions in Canada. Under the Act, maximum levels of liability are established including: no more than $600 million in respect of each travelling exhibition and; no more than $3 billion at any given time in respect of all travelling exhibitions. The Canada Travelling Exhibitions Indemnification Regulations set out specific requirements to be met when owners are seeking indemnification agreements with the Minister. The Regulations also set limitations on the scope of indemnity, establish deductibles, define maximums for and period of coverage, set requirements for condition reporting, outline a claims procedure and provide for dispute resolution, among other things. Applicants may include institutions organizing or participating in travelling exhibitions who apply on behalf of owners. Upon approval of an application by the Minister, the owner of an object or appurtenance included in the particular travelling exhibition may enter into an indemnification agreement with the Minister.

Mortgage or Hypothecary Insurance Protection

The Protection of Residential Mortgage or Hypothecary Insurance Act (PRMHIA) received Royal Assent on June 26, 2011, and came into force on January 1, 2013.

The PRMHIA authorizes the Minister of Finance to provide protection in respect of certain mortgage or hypothecary insurance contracts written by approved mortgage insurers. Under the PRMHIA, a payment in respect of this guarantee would only be made if a winding-up order were made in respect of an approved mortgage insurer that had written an insurance contract guaranteed under the PRMHIA. In that case, the Minister would honour lender claims for insured mortgages in default, subject to: (a) any proceeds the beneficiary has received from the underlying property or the insurer's liquidation, and (b) a deductible of 10% of the original principal amount of the insured mortgage.

As at March 31, 2023, the aggregate outstanding principal amount of loans that are guaranteed under the PRMHIA is estimated at $297.0 billion ($292.6 billion in 2022). Any payment by the Minister is subject to a deductible equal to 10% of the original principal amount of these loans, or $35.8 billion ($34.9 billion in 2022). The principal amount outstanding presented within Table 11.6 does not refer to anticipated losses or payments in respect of the guarantee. No provision has been made in these accounts for payments under the guarantee.

As at March 31, 2023, there are two approved mortgage insurers under the PRMHIA: Sagen Mortgage Insurance Company Canada (formerly Genworth Financial Mortgage Insurance Company Canada) and Canada Guaranty Mortgage Insurance Company.

Nuclear Liability Account

Under the Nuclear Liability and Compensation Act (NLCA), which entered into force on January 1, 2017, and replaced the Nuclear Liability Act (NLA), now repealed, operators of designated nuclear installations are required to maintain financial security against the liability imposed on them by the NLCA.

The NLCA establishes that the operator's liability for damages resulting from a nuclear incident is limited to $1 billion. This amount applies to the "Power Reactor Class" of nuclear installations prescribed in the Nuclear Liability and Compensation Regulations (NLCR). Lower liability amounts for lower-risk installations, based on their commensurate risk, are prescribed in the NLCR. The Minister of Natural Resources is required to review the operator's liability limit at least once every five years, and the government may increase the limit by regulation.

Financial security covers all the categories of damage that are compensable under the NLCA, with the exception of damage arising from routine emissions, and bodily injury occurring 10 to 30 years after a nuclear incident. Through the indemnity agreement, entered into with 9 operators, the federal government covers the liability associated with the two exceptions. It also covers the difference between the lower liability amount prescribed in NLCR for lower-risk installations and, as applicable, the $1 billion liability assigned in the NLCA. The federal government charges each operator an annual fee for providing this indemnity coverage.

The Department of Natural Resources administers the Nuclear Liability Account (Account) on behalf of the federal government through a consolidated specified purpose account. This Account is a continuation of the Nuclear Liability Reinsurance Account under the repealed NLA. All fees paid by the operators of nuclear installations are credited to this Account. The closing balance of this Account as at March 31, 2023, is $5,041,310. Any claims under an indemnity agreement could be up to the level of the liability amount assigned in the NLCA; however, there is no limit to the number of incidents to which the indemnity could apply. There have been no claims against – or payments out of – the Account since its creation under the NLA.

Price Pooling Program—Agricultural Marketing Programs Act

The Price Pooling Program provides a price guarantee that protects marketing agencies and producers against unanticipated declines in the market price of their products. Program participants use the price guarantee as security in obtaining credit from lending institutions. This credit allows the marketing agency to improve cash flow of producers through an initial payment for products delivered. It also provides equal returns to producers for products of like grades, varieties and types. This program is designed to assist and encourage cooperative marketing of eligible agricultural products, including processed products.

International organizations

Within contingent liabilities, callable share capital represents the portion of Canada's capital subscriptions that has not yet been paid-in. Callable capital is subject to call by offshore banks in the event that they were unable to meet their obligations.

Table 11.7 details the contingent liabilities for international organizations and is summarized in Note 8 to the consolidated financial statements in Section 2 of this volume.

**Table 11.7**
**International organizations—Contingent liabilities**
(in millions of dollars)^{Link to table note 1}
Non-budgetary share capital and loans
	2023	2022
Callable share capital
Finance
Department of Finance
Asian Infrastructure Investment Bank	1,076	996
European Bank for Reconstruction and Development	1,184	1,117
International Bank for Reconstruction and Development (World Bank)	10,650	9,851
Multilateral Investment Guarantee Agency	62	57
Subtotal	12,972	12,021
Global Affairs
Department of Foreign Affairs, Trade and Development
African Development Bank	9,805	9,144
Asian Development Bank	8,600	7,955
Caribbean Development Bank	165	153
Inter-American Development Bank	8,919	8,249
Subtotal	27,489	25,501
Total	40,461	37,522
Table 11.7 notes Table note 1 Foreign currencies were translated into Canadian dollars using the closing rates of exchange at March 31, 2023 ($1 USD = $1.3516 CAD; 1 SDR = $1.8181 CAD; 1 EUR = $1.4657 CAD). Return to table note 1 referrer

Pending and threatened litigation and other claims

Refer to Note 8 to the consolidated financial statements in Section 2 of this volume for information on pending and threatened litigation and other claims.

Assessed taxes under appeal

Refer to Note 8 to the consolidated financial statements in Section 2 of this volume for information on assessed taxes under appeal.

Insurance programs of agent enterprise Crown corporations

An insurance program is a program where the insured, an outside party, pays an insurance fee which is credited to an insurance fund or provision. The amount of the fee is based on the estimated amount of insurance fund or provision needed to meet future claims. The Canada Deposit Insurance Corporation, Canada Mortgage and Housing Corporation, Export Development Canada and Farm Credit Canada currently operate insurance programs as agents of Her Majesty. Insurance programs operated by private corporations such as employee group insurance, dental plans, etc., are not included in this definition.

The insurance programs are intended to operate on a self-sustaining basis. However, in the event the corporations have insufficient funds, the government will have to provide financing. The government expects that all four corporations will cover the cost of both current claims and possible future claims.

**Table 11.8**
**Summary of insurance programs of agent enterprise Crown corporations for the year ended March 31, 2023**
(in millions of dollars)
	Canada Deposit Insurance Corporation^{Link to table note 1}		Mortgage Insurance Fund		Mortgage-Backed Securities Guarantee Fund		Export Development Canada^{Link to table note 3}		Farm Credit Canada^{Link to table note 4}
	Canada Deposit Insurance Corporation^{Link to table note 1}		Canada Mortgage and Housing Corporation^{Link to table note 2}				Export Development Canada^{Link to table note 3}		Farm Credit Canada^{Link to table note 4}
	2023	2022	2023	2022	2023	2022	2023	2022	2023	2022
Insurance in force as at reporting date	1,081,987	1,025,235	400,000	394,000	481,000	460,000	33,572	28,556	5,041	5,100
Opening balance of Fund	5,383	3,842	10,583	10,919	1,516	1,552	^{Link to table note 3}	^{Link to table note 3}	16	21
Revenues for the period
Premiums and fees	815	772	25	1,401	763	737	265	254	25	26
Interest on loans	–	–	–	–	5,515	4,208	–	–	–	–
Investment income	125	93	303	279	39	39	–	–	–	–
Other revenues	–	–	891	(negative 2)	8	14	–	172	–	–
Total revenues	940	865	1,219	1,678	6,325	4,998	265	426	25	26
Expenses for the period
Loss on/provision for claims	200	(negative 750)	–	(negative 134)	–	–	–	–	8	8
Interest on borrowings	–	–	–	–	5,506	4,199	–	–	–	–
Administrative expenses	81	68	170	312	67	69	–	–	7	7
Other expenses (includes taxes)	11	6	335	377	189	183	151	–	11	15
Total expenses	292	(negative 676)	505	555	5,762	4,451	151	–	26	30
Net income or (loss) for the period	648	1,541	714	1,123	563	547	114	426	(negative 1)	(negative 4)
Adjustments	–	–	(negative 57)	(negative 1,459)	(negative 577)	(negative 583)	–	–	–	–
Closing balance of Fund	6,031	5,383	11,240	10,583	1,502	1,516	^{Link to table note 3}	^{Link to table note 3}	15	17
Net claims during the period^{Link to table note 5}			71	116			118	30	8	8
Five year average of net claims paid			155	204			149	156	7	6
Table 11.8 notes General notes: Certain comparative figures have been reclassified to conform to the current year's presentation. The dash means that the amount is 0 or is rounded to 0. A blank cell means there is no available data. Table note 1 The Canada Deposit Insurance Corporation (CDIC) provides insurance on deposits placed with member banks and trust and loan companies for up to $100,000 per depositor, per institution. The Corporation is funded by premiums assessed against its member institutions. Return to table note 1 referrer Table note 2 Canada Mortgage and Housing Corporation (CMHC) administers two funds: the Mortgage Insurance Fund (MIF) and the Mortgage-Backed Securities Guarantee Fund (MBSGF). The MIF provides insurance for a fee, to lending institutions to cover mortgage lending on Canadian housing. Besides establishing a framework of confidence for mortgage lending by lending institutions, the Fund facilitates an adequate supply of mortgage funds by reducing the risk to lenders and by encouraging the secondary market trading of mortgages, to make housing more accessible for Canadians. An actuarial study of the MIF is produced as of September 30 of each year. The Corporation determines provisions for claims and unearned premiums at December 31 using valuation factors taking into account new business, claims and interest for the last quarter. The MBSGF supports two CMHC guarantee products: National Housing Act (NHA) Mortgage-Backed Securities and Canada Mortgage Bonds. The Mortgage-Backed Securities (MBS) program was implemented in 1987. For a guarantee fee paid by approved financial institutions, CMHC and ultimately the government guarantee timely payment of monthly principal and interest to MBS investors who participate in a pool of insured residential mortgages which have been repackaged by the financial institution into investments which can be sold to investors in denominations as low as $1,000. The Canada Mortgage Bond (CMB) program was implemented in 2001. Under this program, bonds are issued by a special purpose trust known as Canada Housing Trust and sold to investors in denominations as low as $1,000. The proceeds of the bonds are used to purchase mortgages packaged into newly issued NHA MBS. Canada Mortgage Bonds of $261,664 million ($258,831 million in 2022) including accrued interest, issued by the Trust carry the full faith and credit of the Government of Canada. The timely payment of semi-annual interest and principal at maturity is guaranteed by the Government of Canada through CMHC. Return to table note 2 referrer Table note 3 Export Development Canada (EDC) provides export and foreign investment insurance to Canadian businesses to facilitate and develop export trade. The insurance program has been adequate to provide for the full cost of claims experienced to date and for the cost of future claims established based on previous claims experience. The Corporation does not maintain a separate fund for its insurance program and therefore the balance of the fund is not available. EDC maintains an allowance for claims on insurance which is based on an actuarial review of net loss experience and potential net losses. The balance of the allowance is $247 million ($530 million in 2022). Return to table note 3 referrer Table note 4 Farm Credit Canada sells group creditor life and accident insurance to its customers through a program administered by a major insurance provider and Farm Credit Canada's risk of the insurance program is limited. Return to table note 4 referrer Table note 5 Refers to the difference between claims and amounts received from sales of related assets and other recoveries. Return to table note 5 referrer

Additional financial information relating to these corporations may be found in the annual Inventory of Federal Organizations and Interests. This information is also summarized in Note 8 to the consolidated financial statements in Section 2 of this volume.

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Date modified:: 2023-10-23

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