ESG is one of the central themes of the report, highlighting that the transition to a low-carbon economy requires a fundamental reappraisal of mining company climate risk. Furthermore, the report shows that achieving a satisfactory ESG rating will be critical in enabling mining companies to attract and maintain the support of key stakeholders in the future.
The report found that theoretical capacity levels remain broadly similar to last year, although line sizes continue to become increasingly restricted. Willis Towers Watson noted that many major insurers have withdrawn from coal mining risks in previous years. But currently, it seems that lobbyist pressure has moved on to insurers’ involvement in other industries, with only one global insurer pulling out of coal this year.
According to the report, it is still too early to fully ascertain COVID-19’s impact on the liability and D&O sectors. However, following a series of disastrous losses in 2018 and 2019, the property loss record for mining seems to be improving, unlike in other sectors.
For property business, rating increases are still modest in comparison to other heavy industries, but retention levels, terms & conditions and sub-limits are all now being significantly affected by the hardening process, the report said. Meanwhile, in the liability and D&O sectors, rating increases are now much more pronounced.
Another area the report noted was the increased importance of underwriting data. The new levels of data required by insurers in terms of underwriting information are proving challenging to buyers; in particular, insurers’ scrutiny of their schedule of values and a growing tendency to impose price caps on both property and business interruption amounts, the report said.
“In these unprecedented times, the mining industry finds itself beset by challenges from all sides, as COVID-19 tightens its stranglehold on the global economy and insurance market conditions harden,” said Graham Knight, head of global natural resources, Willis Towers Watson. “However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry. Mining companies must incorporate ESG, above all climate change into their risk mitigation strategies in order to survive in the future.”
“Mining companies need to know how the energy transition is going to affect their industry, why climate change is already transforming their industry risk landscape, how they can play a strategic role in developing their response to this transition and which ESG pressures are going to affect the industry in the future,” he added.