Willis: Mining Rates Likely to Soften in 2010
--Broker Releases Annual Review at Mining Indaba 2010 -
Cape Town, South Africa, February 3, 2010 - Rates for Mining Property Damage & Business Interruption (PD/BI)
insurance are likely to soften in 2010, but could harden again should this volatile sector experience
a catastrophic loss, according to the latest Mining Market Review from Willis Group Holdings plc (NYSE:
WSH). The global insurance broker released its report at Mining Indaba 2010, the annual conference for
natural resource professionals, here.
Last year saw calm return to the mining insurance sector after the unprecedented USD 3.5 billion in
property claims - mainly the result of the commodity cycle boom - sent the market reeling
in 2008. Steve Higginson, Willis Mining Co-Practice Leader, observed, “Last year was below average from a
loss perspective, with claims totalling USD 400 million. Although the perils are no less significant, this
has afforded a moment for the mining insurance market to take stock.”
Andrew Wheeler, Willis Mining Co-Practice Leader, said, “While we expect to see the emergence of a buyers’
market for mining in 2010, the huge losses of 2008 remain fresh in underwriters’ minds. Should
we sustain a significant natural catastrophe event or considerable machinery, property and business interruption losses, the
rates in the Property market may well spike again.”
The return of rising commodity prices and the resulting increase in exposure, together with the continuing change
in climate conditions, are the main concerns for mining underwriters in 2010. Four major factors on
underwriters’ minds are:
- De-bottlenecking - Insurers are putting pressure on clients to implement initiatives that change certain aspects of the
production process to reduce delays, gain efficiencies, and increase throughput in the mining process, including limiting
Supplier of a Supplier exposure.
- Natural catastrophe capacity - After the market shock of 2008, capacity
is returning to the operational mining business, with at least three new markets writing non-proportional business.
However, the level of capacity supply going into 2010 remains below the level of demand in
natural catastropheexposed areas. Capacity remains tight for Earthquake and Rain Event and Flood insurance, especially for
- Commodity prices -Rising prices have resulted in increased exposure for underwriters. Willis predicts that
price caps will be back in vogue in 2010 to provide underwriters with more certainty. If
commodity prices return to 2008 levels, though, large placements may find capacity once again restricted.
security - Many buyers continue to syndicate their risks to a wider range of reinsurers rather
than to a single large capacity provider.
Other key findings in the report include:
- Total PD/BI capacity in this sector is now estimated at USD 1.75 billion.
- The mining construction sector produced positive results for insurers in 2009. With few losses affecting the onshore
construction insurance market, rates and premiums are softening as new entrants have joined the market to
bring global capacity to approximately USD 2.7 billion.
- Since the start of the credit crunch, Willis says that there have been between USD 2 billion
and USD 4 billion in Political Risk claims emanating from the mining industry. These have been
concentrated in Ukraine and Kazakhstan but have also been seen in Brazil, Bahrain, Indonesia and Bolivia.
- A number of Political Violence claims for mining assets were made in 2009, particularly in South America.
This has resulted in reduced capacity and increased premiums that are contrary to the overall Terrorism
and Political Violence market, which is softening.
In the latest Mining Market Review, Willis experts comment across other mining classes and areas of interest
such as Claims, Directors and Officers, Liability and Marine, Specie and Piracy. The publication features a
Special Reports section looking at in-depth issues such as environmental law, North American coal mining, a
consultant’s view on risk in the mining industry and a summary of the threats and opportunities
facing the mining industry in the Philippines, Peru and the Democratic Republic of Congo.
Willis will be exhibiting at stand 2103 at this year’s Mining Indaba. Conference attendees are encouraged to
talk with the team and obtain a hard copy of the Mining Market Review. For those
not attending the conference, click here for a PDF of the report and here for a video of Willis Mining’s leaders discussing the key findings of the review.
Willis Group Holdings plc is a leading global insurance broker, developing and delivering professional insurance, reinsurance, risk
management, financial and human resource consulting and actuarial services to corporations, public entities and institutions around
the world. Willis has more than 400 offices in nearly 120 countries, with a global team
of approximately 20,000 Associates serving clients in approximately 190 countries. Additional information on Willis may be
found at www.willis.com.