NU Online News Service, Feb. 6, 12:38 p.m.EST

Over $3 billion in losses for the mining-insurance industry hasresulted in the loss of 30 percent of insurance capacity, says areport from Willis Group Holdings plc.

The report says the mining-insurance market was hit by $2.7billion in natural-catastrophe losses and more than 60 operationallosses totaling $835 million, resulting in total losses of $3.5billion.

Those losses prompted the 30 percent withdrawal of insurancecapacity since the beginning of 2011.

The report estimates global mining property damage and businessinterruption capacity at $1.25 billion, down from $1.75 billion atthe beginning of last year.

Willis says the loss in capacity “does not represent thedramatic loss of capacity that precipitated historical hard marketssuch as 2001, it may indicate a difficult year ahead for therenewal of mining property damage & business interruptionprograms.”

The three biggest risks the report identified were: resourcenationalism, where nations are blocking outside investors, forinstance, or implementing punitive taxes; natural-catastropheexposure and supply-chain disruption and globalization, both ofwhich can be traced back to earthquake and flooding throughout theAsia region, for instance.

Other mining-related insurance impacts from 2011 into 2012include:

• Construction: market is expected to remain competitive andstable.
• Directors and officers liability insurance should remaincompetitive with plenty of capacity. The report warns, however,that “a significant increase in mergers and acquisition litigationmight test insurers.”
• The international liability market has displayed no sustaineddirection and the uncertainty is expected to continue into thisyear.
• Softness in the marine market may be showing signs of easing,as the downward trend slowed to single-digit decreases at thebeginning of this year.
• The specie insurance market (precious minerals, cash andsecurities) may harden as 2011 natural-catastrophe claims in theproperty-insurance sector work their way through the market.
• Terrorism capacity remained static through 2011 at an estimated$1.75 billion, but political-violence capacity is restrictedcompared to past years, especially in areas of politicalunrest.

Andrew Wheeler, Willis mining practice leader, says in astatement, “Even though the insurance market is still reeling fromthe unprecedented spate of losses in 2011, well risk-managed miningprograms will still be able to get favorable terms and conditionsthis year if they can demonstrate a clear understanding and abilityto mitigate the effects of contingent business interruptionexposures; a proactive approach to minimizing the effect of weatherrelated events to their operations, and that sound risk engineeringand innovative risk avoidance measures form an integral and corepart of their business.”