Insuring coal mining risks is becoming more and more challenging. Capacity has contracted significantly as a growing number of insurers and reinsurers have either withdrawn or curtailed their participation over climate change concerns. 

Many large European carriers have ceased underwriting coal - in particular thermal coal - and US insurers are growing more cautious. While some carriers have withdrawn, others are taking a more nuanced approach and continue to support clean coal and mining in emerging markets, where coal remains an essential affordable source of power.

The reduction in capacity, alongside the general hardening of the commercial insurance market, has resulted in increased premiums. Typically, good mining risks have faced rate hikes of around 15% - 20% at recent renewals. Smaller mining risks are particularly difficult to place and insurers are pushing for higher deductibles in areas like business interruption, with 30-days now the minimum standard. This can be a difficult sized retention for the smallest mining groups.

Capacity building

With capacity in short supply, brokers must seek out new markets. Miller has been successful in supplementing capacity from lead markets like London with additional capacity from further afield, including managing general agencies, reinsurers and carriers in other geographies.

The reduction in capacity for mining risks is also driving a move towards bespoke programmes. During softer market conditions, many mining companies were able to purchase limits in excess of their needs, at little or no cost. In today’s market, Miller is helping its clients maximise their cover where possible and establish appropriate levels of limits, deductibles and capacity.

Differentiation 

Presentation of risk is critical when attracting insurer support in a hard market, as is the ability to demonstrate adherence to good risk management. For example, underwriters are particularly wary of tailings dam and fire system maintenance after a number of large losses in recent years. A comprehensive survey from a reputable surveyor and a positive response to risk recommendations – as well as a good inventory of spares – should yield benefits in terms of reducing price volatility. 

The tough market for coal mining clients is here to stay, and further reductions in capacity for coal are likely. In these conditions, mine operators will need insurance brokers that can build capacity and present their risks in the best possible light. Keeping on top of risk management will make all the difference when securing capacity or mitigating the highest premium increases.