Mining insurance faces uncertainty with growing risks and challenges
The mining sector faces new challenges and risks, impacting insurance needs. Issues include climate disruptions, operational dangers, and geopolitical instability. Insurers worry about dam failures, climate impacts, and regulatory changes. Compliance with ESG is crucial. Insurance types needed include public liability, professional indemnity, plant and equipment, and income protection.
Parametric insurance offers a new risk transfer option, paying out pre-agreed amounts for specific events. Mergers and acquisitions in mining drive demand for warranties and indemnities insurance. Extreme weather events disrupt mining operations and supply chains. Insurers are cautious about underwriting, especially for tailings dams.
Claims in the mining industry are expected to increase in frequency and severity. Political risks, like resource nationalism and expropriation, are prevalent in Latin America, Africa, and Asia. Recent conflicts in Mali and Ukraine highlight the real risks. Political risk insurance is available but expensive and limited in scope.
Despite political instability in some regions, new rulers may see the benefits of mining projects operating normally. Insurers are cautious due to recent losses from weather events in Australia. Insurers are open to covering various types of mining projects, including surface, placer, in-situ, and underground. The mining industry faces increasing cyber risks, with attacks ranging from password spraying to phishing campaigns. Insurance companies are focusing on risk engineering and quality to address emerging threats. Sovereign risk insurance can lead to coverage disputes, prompting some businesses to rely on bilateral or multilateral investment treaties for protection.
In Mali, Barrick Mining’s gold complex faces operational delays due to a two-year dispute over new mining legislation. The military-led government has taken actions such as blocking gold exports and seizing gold stock, jeopardizing potential revenues exceeding $1bn for both parties. Tensions rise as negotiations for a new mining contract continue.
The mining sector experiences instability, with companies facing cyberattacks and political risks. Recent incidents, such as the CrowdStrike tech failure in July 2024, have caused disruptions. Insurance markets have sustained heavy losses, prompting a shift in focus towards emerging risks like technologies and geopolitical pressures. Insurers are competing to support the most resilient mining businesses.
Read more at Yahoo Finance: Examining mining insurance in a world of growing uncertainty