Mining insurance 'not yet a truly hard market'; capacity high by past standards: Willis Towers Watson
Mining insurance is still not a truly hard market yet, with capacity remaining high by historical standards, according to Willis Towers Watson’s (WTW) Mining Risk Review 2019.
Graham Knight, global head of natural resources at WTW, noted that the review was being launched in the aftermath of “yet another tailings dam tragedy”.
A burst dam in Minas Gerais, south eastern Brazil, left hundreds dead or unaccounted for earlier this year.
Knight added: “From an insurance perspective, although rates are generally hardening as a result of tailings dam and other losses, this is still not yet a truly hard market. Capacity remains plentiful by historical standards.”
The review said: “However, there is no doubt that those buyers (and their brokers) that were ill-prepared for the turnaround in the market over the last 12 months have either ended up with significantly more expensive insurance or with gaps in cover - and possibly an unattractive combination of the two.”
It also pointed out some issues within the mining industry that need to be addressed, and which insurers need to take into account. For example, miners are exposed to a number of new risks that can threaten project viability because of negative attitudes, such as increased cyber risk and a failure to train and upskill them properly. It said the potential for the process to discard valuable human experience during the digitisation process suggests that miners are exposed to a number of new risks that can threaten project viability.
The review highlighted bottlenecks as another problem. “Too often, getting a mine back up and running after a major incident is dependent on factors outside the mine operator’s control; too often in the event of a major loss, the precise cause can often remain uncertain.”
Insurers also need to be aware of geopolitical risks including increased tariffs, regulations, legislation and tax liabilities imposed between different countries. WTW said these issues have had a direct impact on the viability of mining projects in a variety of locations around the world, especially given the global nature of the industry’s supply chains.
WTW added that the relationship that miners form with local communities is always a fundamental factor to consider in developing an effective risk management strategy. “Mining industry risk managers and their teams need to be looking to the deep relationships and activities that need to be built and developed for real and sustainable long-term progress.”
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