August 13, 2015 by Canadian Underwriter
Canadian insurers continue to be committed to the mining industry despite lower premium volume stemming from market competition and reductions in insurable values, primarily decreases in business interruption (BI) values, according to Marsh LLC’s Mid-Year Mining Market Update released on Wednesday.
The report on the global insurance marketplace for mining risks said that, in Canada, the “typical property programme is seeing a minimum 5% rate reduction, although double-digit decreases have been obtained for mining companies of all sizes, with an emphasis on engineering, and maintained investment in loss control.”
Furthermore, many clients saw their casualty programmes renewed on a flat premium basis or with modest reductions in the first half of 2015. “Insurers continue to offer pollution extensions, but require more detailed underwriting information – particularly as it relates to tailings storage facilities − such as stability reports, audit protocols, safety measures, and emergency planning,” the report said.
Marsh also reported that the Canadian mining industry is in the early stages of a reclamation bond comeback. Surety support exists with a spectrum of cost and credit capacity depending on credit quality of each client. There approximately fifteen surety markets with capabilities in this space.
“Quebec, and the Northwest Territories have both recently agreed to accept a surety bond as financial assurance for reclamation obligations, and British Columbia is close to making an official announcement that bonds will be accepted as security,” the report said. [click image below to enlarge]
Marsh Canada has been an integral part of these changes, the report said, and clients should be made aware that there is an off balance sheet, unsecured alternative to posting bank instruments (letters of credit).
Globally, the insurance marketplace for mining risks remained buoyant in the first half of 2015, with abundant capacity, a slide in rates for a significant majority of property and terrorism risks and stable casualty market conditions. “In general, the suppression of commodity prices has brought about lower BI declared values for a majority of our clients, and, as such, most insureds are regularly seeing double-digit percentage reductions on their year-on-year premiums,” the report said.
The second half of 2015 marks the 14th consecutive quarter of average rate declines, Marsh noted.
From an environmental perspective, as a result of recent incidents, such as the breach of the tailings storage facility at the Mount Polley mine in British Columbia, global insurers are reviewing their positions and available capacity and coverage for the region. “In particular, pollution coverage is under scrutiny, causing some uncertainty for Canadian insureds,” the report said.
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