Wednesday, July 24, 2024

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Mining companies looking to increase captive utilisation – Lockton

Mining companies, particularly those mining thermal coal, are looking at alternative risk financing tools, such as captives, for liability cover as a means of countering stricter and dwindling capacity in the commercial market.

Consistent with the wider financial sector, mining liability insurers are focussing on ESG and specifically thermal coal exposures when it comes to writing risk.

The property market for mining operations is generally stable, with limited new participants or withdrawals, according to Lockton’s 2024 Insurance Market Update.

Despite this, the sector is facing rate increases of around 5%, which may prompt further mining companies to look towards captive utilisation.

This pricing trend is likely to continue during 2024 with expectations the market will become more of a buyer’s marketplace.

The mining sector, and related energy sector, were hit with significant claims during 2022 and 2023, with several large claims reported in 2023.

The report noted that insurance capacity has reduced in Brazil for mining companies looking for worker’s compensation cover, mainly due to changes in the guidelines of the primary local reinsurer, which is a key leader in insurance treaties.

Lockton said this has prompted major insureds to seek alternative capacity through international facultative reinsurance or consider establishing captive reinsurance structures.

In recent years the mining sector has been affected by an array of political violence events, which in many cases has compromised physical assets and revenues.

Directors and officers insurers’ risk appetite in the mining sector varies, depending on several internal and external factors, with one being a companies’ ESG disclosures.