Contingent liabilities

Public Accounts of Canada 2025 Volume I—Top of the page Navigation

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• Section 11: Table of contents: Section 11: Contractual obligations, contractual rights and contingent liabilities as at March 31

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 9 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.

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 temporarily increased to $250,000 for the 2022 program year (and to $350,000 for the 2023 program year), then $250,000 for the 2024 program year to help producers who are facing increased input costs and interest rates. 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 primary agriculture 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 (CALACALA) 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.

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.

In December 2024, the Government of Canada issued a second loan guarantee for $500 million in debt for the Maritime Link. Interest and principal payments on this second tranche of guaranteed debt will begin on June 1, 2025, and will occur every six months until the debt is retired on December 1, 2052.

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 $9,204,197,561 as at March 31, 2025.

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. On May 17, 2024, the loan guarantee was revised to $19.5B. On February 5, 2025, the Syndicated Facility was fully repaid, and the guarantee was reduced to nil. 

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 Indigenous People 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 Indigenous individuals and First Nations 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 First Nations members residing on reserves, First Nations 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 $3 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 Agents 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.

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.

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 compensable damage under the NLCA up to the limit imposed on operators under the NLCA or that is set out in the NLCR, 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, 2025, is $5,377,535. Any claims for a nuclear incident under an indemnity agreement could be up to the level of the liability amount assigned in section 24 of 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.

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, 2025, the aggregate outstanding principal amount of loans that are guaranteed under the PRMHIA is estimated at $317.4 billion ($305.4 billion in 2024). Any payment by the Minister is subject to a deductible equal to 10% of the original principal amount of these loans, or $38.7 billion ($37.2 billion in 2024). 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, 2025, there are two approved mortgage insurers under the PRMHIA: Sagen Financial Mortgage Insurance Company Canada (formerly Genworth Financial Mortgage Insurance Company Canada), and Canada Guaranty Mortgage Insurance Company.

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 9 to the consolidated financial statements in Section 2 of this volume.

Pending and threatened litigation and other claims

Refer to Note 9 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 9 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.

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 9 to the consolidated financial statements in Section 2 of this volume.

Public Accounts of Canada 2025 Volume I—Bottom of the page Navigation

• Previous page: Contractual rights
• Section 11: Table of contents: Section 11: Contractual obligations, contractual rights and contingent liabilities as at March 31