What to Expect for Your Next Renewal
With 17 years in the business, David Brosbell, Senior Partner Mining & Energy, is one of PRL’s go-to guys for all things mining insurance. He built up PRL’s mining division, growing it from just a handful of accounts and two staff members to more than 80 clients and a team of 12 dedicated mining insurance professionals in nine years. We sat down with David to talk about the current insurance climate and what mining companies can expect when it comes time for the next renewal.
Q: Can you give us an overview of PRL’s mining practice?
A: We are the largest independent mining insurance broker in Canada, servicing companies of all sizes with operations anywhere in the world. Our advantage is intellectual capital, which we’ve built by being unwaveringly dedicated to the mining industry for almost a decade. This experience has provided us with great benchmarking data, so we know what rates are competitive for our clients’ insurance programs. This also gives us better negotiating and buying power to achieve the best results for our clients.
Q: Can you give a breakdown of what kinds of insurance you offer your mining clients?
A: We cover all lines of insurance for mining, but some of the critical ones are property and machinery breakdown (including business interruption), specie, mobile equipment, management liability (including important coverages such as directors and officers liability, kidnap and ransom and crime and cyber) and general and environmental liability. We are also able to provide group employee health benefits coverage for Canadian companies. Our dedicated surety professionals provide all of our mining clients’ bonding needs, including reclamation bonding.
Q: What’s going on in the current insurance market?
A: This market has been hardening steadily for the past year, although so far it is not as severe as the hard market the industry experienced in the early 2000s. The hard market is due to the significant catastrophic losses which mainly occurred in 2017, in addition to a number of large traditional insurances losses last year and some rather substantial property losses and business interruption losses that occurred in the energy/mining sector. As a result of these losses, premiums are going up in all lines of business and in most industry sectors. A number of insurance companies, because they have been burned (quite literally and figuratively), have decided to get out of the mining sector.
Often you have several insurance companies covering one risk, as a way to diversify. Recently, we are finding that a lot of insurers are reducing capacity, offering $20 or $25 million of coverage instead of the $50 million they offered in the past. This means the broker must bring more insurers to the table, which makes it a lot more challenging to fill an entire line. For this reason, it’s in a mining company’s best interest to work exclusively with a brokerage that has the depth of knowledge and experience in the mining sector to achieve the most cost-effective and broad insurance program possible, given the current market conditions.
Q: What are some coverage considerations specific to mining?
A: In addition to lowering total capacity, some insurers are restricting the type of risks they are willing to insure. For example, based upon some recent losses, insurers are pricing coverage for tailing dams higher or refusing to provide coverage for that risk entirely. This can create issues for a mining company given that a tailing dam loss doesn’t just interrupt the business but can create a huge environmental impact and potential loss of life.
Loss, damage or failure of a large gear in a mill can cause a significant business interruption loss. Given that mining companies often don’t have spare gears, getting one delivered to the mine site could take upwards of a year. While a fire in the mill could cause some property damage, in our experience it’s the business interruption coverage that causes the most concern on both the insured and insurer sides.
Small losses with mobile equipment are on the rise and these kinds of small losses add up and chip away at making a client’s insurance program profitable to the insurance company. Insurance companies are starting to restrict coverage on automation as well. The rationale is that people will operate a piece of equipment with less care if it’s not manned. As brokers, we represent our clients and try to help control these costs. We strive to put the proper insurance programs into place for our clients.
Q: So, what should people do to weather this storm?
A: Clients should be proactive from an engineering standpoint. We typically arrange the loss prevention engineering reports for our clients using independent, highly recognized third-party engineers in the field. As a hand-on broker, we start well in advance of the renewal dates, working closely with our clients to implement the loss prevention recommendations wherever possible. Sometimes the recommendations don’t make sense and we strategize to come up with alternative solutions.
Underwriters and insurers are looking for their clients to have a genuine interest in improving the quality of the risk. Being able to demonstrate a plan to enhance operations and including clients in meetings with underwriters to sell the risk can make a big difference. This strategy helps increase available capacity, enhance coverages, optimize deductible levels and secure the most competitive premium.
Whether you are in the exploration phase or managing operations around the world, PRL has the expertise to help. Our team of experts can craft insurance programs tailored to your business that will protect against business risks, your specific exposures and insurance issues that could affect your success. Contact us today to learn more:
Adrian Vanelli, 416.644.4035, email@example.com