"A $3 million loss would break the government right now, as far as their ability to obtain reasonable insurance," said Lois Grabke, insurance risk manager for the GNWT.

The territorial government is still suffering through the insurance hangover of three major fires in the mid-90s, when schools burned down in Fort McPherson, Panniqtuuq and Cambridge Bay.

Those three schools alone cost insurers a total of $29.8 million. In the period between 1990 and 2002, the GNWT paid a total of $21 million in premiums -- far below what insurance companies had to pay out.

"So you can see why insurers are a little upset with us," said Grabke.

The threat of losing insurance only applies to the GNWT. The city of Yellowknife and numerous private insurance brokers in the territory do not have similar fears.

Skyrocketing premiums

Following the loss of the schools, the government's insurers sent premiums through the roof. Before the first school fire, the GNWT paid about $600,000 a year in building insurance. It now pays over $2 million annually.

The government insures its buildings against all major damage, including vandalism, windstorms and floods.

But half a decade later, why haven't premiums started to go down?

Part of the problem is Sept. 11, which caused upheaval in the insurance industry. The GNWT was on track to have its premiums begin to fall this year, but all of that has now changed.

However, an ongoing, and major, problem for insurers is that tiny Northern communities have expensive infrastructure but few resources to battle fires. In the NWT, only Yellowknife has a paid fire fighting force.

Inuvik has a paid fire chief, but apart from Yellowknife all of the communities work exclusively with volunteer fire fighters.

That adds to risk, and with insurance risk means cost: building in communities with a volunteer fire department is automatically placed in the highest risk -- and therefore highest cost -- category.

To alleviate the problem, politicians have given NWT fire marshal Don Gillis about $425,000 a year extra since 1999 to carry out a territorial fire protection strategy, which was first introduced in that year.

"We're acutely aware of major loss fires and the impact they may have on insurance rates," he said.

The strategy is a wide-ranging document, tackling everything from public education to fire training, equipment levels and enforcement of fire codes.

For the first three years of implementing the strategy, the government trained 20 people from across the North as qualified fire instructors. Now those people are, in turn, training other volunteers.

So what would happen if a major fire burned down a building owned by the territorial government tomorrow?

Insurance companies could simply pull their coverage altogether. But more than likely, the GNWT would try to negotiate a deal, raising deductibles and trying to mitigate another huge increase in insurance premiums.

But Grabke holds out some hope.

"Over the past six years we have had a much better loss history. The number of losses and the severity of those losses has come down considerably, and so we are starting to be in a much better negotiating position with insurers," she said. "So we like to think that we are getting better."