MINING INSURANCE
Tall tails
another insurance broker, took this point further:
“Inherently, the more risk involved, the less
appealing underwriters are to want to write that
risk, or the more money they want to charge.”
The economics around how much a mining
company is willing to pay for cover, the location
of the mining operation in question, and the
excesses they will take on are all factored into
the decision-making process, according to
Stewart.
And, while the mining sector has undoubtedly
become a lot less risky in recent decades, it is
still ‘high risk’ compared with other industries
the insurance sector serves.
Wheeler explained: “The operational risk that
comes with mining is more influential than in any years. Despite the industry’s recent claims
history, policies continue to be written and cover
continues to be renewed from year to year.
In Willis Tower Watson’s Mining Risk Review
2019, released in September, the company
estimated some $800 million of insurance
premiums had been booked for the year-to-date,
up from less than $700 million in 2018.
Releasing the review, Graham Knight, Global
Head of Natural Resources at the firm, said
although rates were generally hardening as a
result of tailings dam and other losses, cover was
still available.
He added: “Capacity remains plentiful by
historical standards and, when rates are on an
upward trend, we are by no means in a truly
distressed situation.”
Gallagher’s Stewart agreed with this sentiment
and said any large industrial miner continues to
have insurance in place to protect its assets, in
addition to liability policies for both the company
and its directors and officers.
“Essentially, any big company will buy the other area of the market given mining comes
with high frequency and high severity risk – two
of the worst traits for the insurance market
underwriting fraternity to grapple with in terms
of appetite and pricing.”
This isn’t to say that mining companies are
unable to obtain mining insurance following a
succession of high price claims in the last few same suite of insurances but they will be tailored
to some degree to cater for the specifics that
those entities are exposed to,” he said.
His colleague and Gallagher Partner, Alan
Bennett, said mining companies will also, to an
extent, prioritise cover based on their loss
history, meaning they will take out policies to
protect against a costly event reoccurring. said.
He added: “Insurers are clarifying the cover
they are happy to give; they’re not necessarily
walking away from giving cover, they just want to
be absolutely clear – on behalf of the buyer and
seller – of the cover that they are providing such
that if an accident does occur, there are no
surprises for either party.”
Towers Watson told IM: “Insurance underwriting
capacity, broadly speaking, is dependent on risk
quality and product type. Factoring this in, the
mining world has – and continues to be – one of
the most difficult areas of underwriting appetite,
capacity and, in most respects, pricing.”
Neil Stewart, Managing Director of Gallagher,
Such talk leads, of course, to tailings dam cover
and, arguably, the main reason there is a
perception that the insurance industry is no
longer offering cover to miners with certain types
of dams or with dams located near communities.
Wheeler put this into perspective: “One of the
problems is the tailings dam exposure and
accidents have occurred at a time when the
whole of the market is haemorrhaging. That is
probably as pertinent to the problems we are
seeing in the insurance space than anything
else.”
This has seen insurers take a different
approach to offering cover.
Stewart said any discussion around potential
tailings dam cover starts with data and the need
for insurers to understand the potential risks
mining companies are looking to protect against.
“There are some fairly rigorous data requests
around the construction of your dams, the
management of the dam, how quickly it is being
raised, what is downstream of the dam, etc,” he
Reinforcing
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16 International Mining | NOVEMBER 2019
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