MINING INSURANCE
Pryor added to this: “It is worth saying that
while the capacity and cover (for policies relating
to tailings dams) has certainly reduced and
narrowed, in addition to the sub limits available
being constrained, cover is still available.
“The amount of cover you can get is very much
tied to the amount of information you can
provide on these facilities.”
Sidhant Soni, from another global insurance
company, says insurance companies were
exhibiting caution when it came to these policies.
“Insurance companies are taking a lot of cation
and seeking independent (from any reputed third
party company) tailing dam evaluation or
inspection data from the prospect client, along
with the past failure history. The current factor of
safety, designed vs operational parameters,
inspection frequency, construction type
(upstream, downstream), the zone of influence,
real-time monitoring, environmental impact,
geotechnical condition, water management, etc.
are some key elements of the thirdparty
inspection reports.” he said.
When it comes to obtaining liability cover,
Gallagher’s Bennett said the recent tailings dam
accidents had been significant “market-changing
events”.
“A lot of underwriters have pulled out of the
writing of mining insurance because of the
tailings exposure,” he said.
The same is true for obtaining liability cover to
protect company directors and officers, Stewart
added.
These market changes are partly a reaction to
the recent tailings dam accidents and partly a
reflection of the insurance industry’s prior
understanding of the risks involved with these
facilities.
Wheeler said: “Some of those product areas
(around tailings) that the insurance market
previously provided were given, perhaps, slightly
naively without enough technical understanding
and knowledge of the risk at hand.
“The market is now adjusting to that exposure
and financial loss in a way that mining
companies may not like.”
This reduction in insurance capacity for certain
forms of cover is one of several reasons why
many companies are spending money on
changing their tailings storage method – shifting
away from downstream facilities, or filtering
tailings as part of a dry stacking solution.
Pryor believes the tailings review being
conducted by the International Council on Mining
& Metals (ICMM), the United Nations
Environment Programme and the Principles for
Responsible Investment will go some way to
allowing mining companies, insurers, risk
managers and other industry participants to
understand the risks that come with existing and
new tailings dams.
The independent review intends to establish
an “international standard” on tailings storage
facilities, according to the ICMM, with the aim to
complete the project by the end of the year.
While such a report could improve
transparency within the industry, as has
previously been noted, the mining insurance
sector – much like the mining industry – will
remain cyclical in nature, with rates, excesses
and underwriter capacity/appetite fluctuating
from time to time.
Pryor puts this in perspective: “There are
some markets that are very transactional/
opportunistic and come into the market when
there is a quick buck to be made and pull out
very quickly when there are losses.”
During this market volatility, technical insurers
such as Swiss RE, Munich RE, Hannover RE, AIG,
Zurich, Scor and others tend to stick it out, but
may exit certain classes of cover – for example
AIG no longer offers mining liability cover and
Munich RE has exited all forms of mining risks in
South Africa.
In periods such as now when premiums
received are outweighed by claims, some
underwriters might exit markets, restrict cover
and/or increase excesses, but the reverse could
happen in the future when the balance shifts.
Wheeler explained: “If we have a 10-year
period where there are no tailings dam incidents
and the market starts to restore to profitability
and normality, I see every likelihood that all of
those product areas that I mentioned earlier will
start to become more confident and ease up on
the some of the restrictions, pricing problems
and otherwise that they are giving policyholders
today.”
Future cover
During this theoretical decade into the future, it’s
safe to assume the makeup of the mining
industry will undergo significant change:
automation is expected to continue to gather
momentum, climate change concerns will play a
bigger role in miners’ strategic decision-making
and a company’s social licence to operate will
have more of a bearing on the operating
environment.
Some of these concerns are already being
acknowledged by the mining insurance
community.
Cybersecurity protection might not be high up
the agenda of mining company’s risk
departments – with the current industry takeup
low – but the increased adoption of autonomous
equipment and plants, plus examples of cyber-
attacks from other related industries, could make
miners rethink their stance.
“Industries dependent on operational
technologies, such as the mining industry, are
realising the criticality of robust cybersecurity
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NOVEMBER 2019 | International Mining 17