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

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

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

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

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

Willis says the loss in capacity “does not represent the dramatic loss of capacity that precipitated historical hard markets such as 2001, it may indicate a difficult year ahead for the renewal of mining property damage & business interruption programs.”

The three biggest risks the report identified were: resource nationalism, where nations are blocking outside investors, for instance, or implementing punitive taxes; natural-catastrophe exposure and supply-chain disruption and globalization, both of which can be traced back to earthquake and flooding throughout the Asia region, for instance.

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

Construction: market is expected to remain competitive and stable.
Directors and officers liability insurance should remain competitive with plenty of capacity. The report warns, however, that “a significant increase in mergers and acquisition litigation might test insurers.”
The international liability market has displayed no sustained direction and the uncertainty is expected to continue into this year.
Softness in the marine market may be showing signs of easing, as the downward trend slowed to single-digit decreases at the beginning of this year.
The specie insurance market (precious minerals, cash and securities) may harden as 2011 natural-catastrophe claims in the property-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 restricted compared to past years, especially in areas of political unrest.

Andrew Wheeler, Willis mining practice leader, says in a statement, “Even though the insurance market is still reeling from the unprecedented spate of losses in 2011, well risk-managed mining programs will still be able to get favorable terms and conditions this year if they can demonstrate a clear understanding and ability to mitigate the effects of contingent business interruption exposures; a proactive approach to minimizing the effect of weather related events to their operations, and that sound risk engineering and innovative risk avoidance measures form an integral and core part of their business.”

Special Reports /

Mining Insurance Losses Cause 30% Drop in Capacity

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