Over $3 billion in losses for the mining-insurance industry has resulted in a decrease of 30 percent of insurance capacity in the line, says a report from Willis Group Holdings.
According to the report, 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 that while the loss in capacity "does not represent the dramatic loss of capacity that precipitated historical hard markets such as in 2001, it may indicate a difficult year ahead for the renewal of Mining Property Damage and Business Interruption programs."
The three biggest risks the report identified were natural-catastrophe exposure and supply-chain disruption, both of which can be traced back to earthquakes and flooding throughout the Asia region, as well as resource nationalism, where nations are blocking outside investors, for instance, or implementing punitive taxes.
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; can show a proactive approach to minimizing the effect of weather-related events to their operations; and can show that sound risk engineering and innovative risk-avoidance measures form an integral and core part of their business."
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