MINING INSURANCE
and risk transfer solutions in the wake of
significant losses/incidents at companies such
as Norsk Hydro and Maersk,” Pryor said.
“Whilst not specific to the mining industries,
these incidents focus the attention on failures of
the operational technologies of organisations,
and the speed at which losses can manifest.”
Underwriters are not yet insisting on certain
cyber protections being in place before offering
cover, but they would typically like to see miners
employ a clear segregation between information
technology and operational technology (OT),
according to Pryor, with the markets keen to
understand what measures are in place to ensure
there are no links between the two.
Another consideration is the operational
resilience of miners’ OT environment; knowing
what measures are in place to contain a potential
problem should one occur, according to Pryor.
The amount of redundant systems at site – some
equipment being decades old – and the
protections in place for these are also coming
under the spotlight.
Sidhant Soni added: “The site should have a
modern malware protection, which should be
tested frequently against any breach. It is
considered good to have the offsite backup of all
operational and critical data with regular backup
frequency. The offsite backup server should also
be well protected against a cyberattack.”
Climate change concerns are already having
an impact on those companies looking for
insurance that mine and use thermal coal, with
several underwriters reducing their exposure to
this sector.
In the US, insurer Chubb recently announced it
would, from 2022, stop insuring thermal coal
operations generating more than 30% of their
revenue from such activities. This followed Zurich
withdrawing from the market, in addition to
many other global companies suspending
coverage.
Matt Clissitt, a Director at Willis Towers
Watson’s Natural Resources division in London,
highlighted this in the company’s recent report:
“Another consideration for insurance buyers in
the mining sector will be the developing mindset
surrounding ethical mining and the consequent
withdrawal of capacity for certain coal mining
exposures.”
Pryor remarked on this market move: “It’s
probably not reached a crisis yet – there is still
enough capacity out there – but it’s becoming
more and more difficult for thermal coal mining
and power plant companies to find sustainable
operational insurance cover.”
A company’s social licence to operate is too
being considered – if not written into policies –
with underwriters asking a lot more questions
about a mining company’s community
relationship and interactions, according to Pryor.
“More recently, mining companies have come
under increased pressure to develop corporate
social responsibility strategies as part of their
overall business strategies,” he said. This is
seeing more insurers follow an “ethical
underwriting route” where issues such as child
labour, mine rehabilitation, environmental
footprints and climate change are considered
when determining how they allocate their
insurance capacity.
Wheeler sees operating to a licensed standard
that considers a company’s neighbours and
environment as “part and parcel of good mining
management”, but admits operating – or not
operating – to these standards may have more of
an impact on the operation’s success or failure
depending on the region in question.
Several examples over the last few years back
this up where not paying due attention to
community or local stakeholder concerns has led
to illegal blockades, court cases or failure to gain
access to potential development projects.
And, with issues such as water, energy and
The increased use of autonomous vehicles
could see mining companies invest in cyber
security insurance policies (credit: Rio Tinto)
climate change likely to increase in prominence,
the risks associated with a company’s social
licence to operate are only going to go up.
While there are global indices that measure
environmental, social and governance standards,
insurers are, overall, not factoring these scores
into their risk calculations.
Wheeler questioned: “Can you understand
what is meant by the social licence to operate
and its influences and meanings to assess what
is a ‘good’ and ‘bad’ risk? Yes, you can.
Principally, though, it is very subjective. A lot of
these incidents tied to a company’s social licence
to operate are only understood by the sector
after the event.”
This is undoubtedly why insurers are currently
so focused on the risks that come with tailings
dam facilities. They will all hope the upcoming
independent tailings dam report brings needed
transparency to appropriately measure the risks
associated with these structures.
Similar industry reports that have applications
in other classes of insurance coverage would also
be appreciated by the sector, with Pryor’s
assessment of the insurance industry ringing
true: “As long as insurers can measure risk, they
can put a price to it. It’s when they cannot
measure this that it becomes problematic.” IM
NOVEMBER 2019 | International Mining 21