In 2011, the mining insurance market was not only hit by $2.7 billion in
natural catastrophe losses, but over 60 operational losses totaling $835
million. The $3.5 billion total estimate of losses facing mining
insurers has prompted a 30 percent withdrawal in insurance capacity
since the start of 2011. This is according to the latest Mining
Market Review released today by Willis Group Holdings plc (NYSE:
WSH), the global insurance broker.
The report, published to coincide with this week's annual African Mining
Indaba in Cape Town, a conference held for natural resource
professionals, estimates that the current global capacity available to
mining Property Damage & Business Interruption (PDBI) insurance
programmes is $1.25 billion, down from $1.75 billionat the start
of 2011. Willis says that "whilst this 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 PDBI
programmes".
Willis' report identified resource nationalism, natural catastrophe
exposure, and supply chain disruption and globalisation, as the three
biggest risks facing mining companies:
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Resource nationalism and punitive taxation regimes are no longer only
an issue in emerging markets, noted Willis, with "developed countries
(notably the United States, Australia and Canada) increasingly
adopting resource nationalist policies that include the blocking of
Chinese investments and the tightening of fiscal regimes in the
extractive sectors". The report includes a chapter on the myths and
realities of resource nationalism by global analysis and advisory
firm, Oxford Analytica.
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The huge impact of the Japanese earthquake and tsunami, the
Christchurch earthquakes, the Queensland floods, earthquakes in Papua
New Guinea, the weather events and floods in Brazil and South Africa
all served to reinforce the threat to the mining sector posed by
natural catastrophe events.
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The Japanese earthquake and tsunami placed supply chain management at
the top of the agenda for most mining boards.