The thoughts of an established leading underwriter
For a couple of years now, the results for mining insurers have been mediocre at best, with the premium pool drained by attritional losses. Indeed, during the past two years, there has been not enough money to pay the bigger losses for which we are in business.
However, I would like to believe that currently rating levels are generally going in the right direction and market forces are doing their job. Most of us mature underwriters have been through those cycles one way or the other and I tend to believe we are able to cope with it – albeit that some clients would argue with that.
The dual challenge of climate change and mining losses What’s increasing, however, are the challenges introduced by forces not directly involved with mining activities. Indeed, the insurance of the risks associated with these challenges are already having an impact on the insurance industry at large and the mining insurance market in particular.
The global political situation, revolving around climate change, its impact and the reasons for it on one side and the catastrophic incidents in the mining industry on the other, is directly affecting the mining insurance market.
I´ll dwell on the climate change topic – albeit from a humanitarian point of view the latter is probably more relevant for the recent activities of UNEP, ICMM, PRI in relation to tailings dams.
There is no doubt that burning fossil fuels in the quantities that has been done globally does not do any good to our environment and is contributing to the climate change that we have been experiencing for some time now.
In particular, burning coal to generate electricity is being identified by the general public as being the “culprit”; hence the direct link to the mining industry and its insurers. With politicians seen at best as being too slow to tackle the challenges, “vox populli” is calling upon the financial industries to use their potency to leverage the de-carbonization process.
Bluntly said: no investment in coal – no insurance for coal risks and vice versa. And the fact that we insurers and reinsurers are covering both sides, the risk taking and investment side, makes us an obvious “target”.
Adding to the challenges facing the insurance industry is the fact that most insurers are PLCs with private and institutional shareholders, both of which are becoming increasingly concerned about the Environment, Corporate Social Responsibility and Corporate Governance – in short ESG - and they are demanding answers from the C-Suite to their concerns.
Unfortunately, the nature of mining and the public perception of the industry is that ESG has not been high on their agenda. Phrases such as:
are only a few of the typical phrases associated with the mining industry that one comes across in discussions over the last few years, in particular fueled by the most recent tragic incident in Brazil.
All this is putting pressure on those insurers and reinsurers having supported and still are supporting the mining industry as one which we still need for some time – albeit that some commodities will become less important, others becoming increasingly important, but not without their own challenges.
However, the mining industry needs to overcome the perceptions that I mentioned - and I am confident they will do so. This will allow us underwriters to concentrate on what we know best - providing sustainable insurance cover for a sustainable industry.
Günter Becker is head of Mining at Munich Re.
