Special report: metals and mining risks

WHAT MAKES THE METALS AND MINING SECTORS EXCITING TO YOU?

Matthew Gooda, underwriting manager for metals and mining, Berkshire Hathaway Specialty Insurance (BHSI): For me personally, it starts with the fundamental importance of the sectors.

It’s trite but true that everything we use is grown or extracted, so the extractives industries are essential to all progress beyond subsidence agriculture!

To illustrate their importance, consider that since 2000 the portion of the global population with access to electricity has grown from 78% to more than 91%. That is hundreds of millions more people that are now able to refrigerate food and light their homes after dark.

And not only have the metals and mining industries enabled historic societal transformations, like urbanisation, industrialisation, mass travel and electrification, they are now enabling the transition to renewable energy by providing battery metals, which are vital ingredients for energy storage.

WHAT MAKES THESE SECTORS SO INTERESTING TO BHSI?

Gooda: To successfully underwrite these technical risks long term requires a deep understanding of both individual industry assets and the volatility profile of the industry as a whole.

We aim to be a long-term, stable partner to these industries, and the patient and thoughtful approach this requires aligns perfectly with BHSI’s culture and strengths.

WHAT CHALLENGES HAVE THE INDUSTRY AND ITS INSURERS FACED IN 2023?

There are some obvious challenges around commodity market risk for the metals and mining industries as the Chinese economy wrestles with some deeply rooted issues, as well as an uptick in recent loss activity for insurers.

But if there is one issue I want to highlight here, it’s wildfire exposure. Wildfire is not an equal threat to operations worldwide but it has recently threatened several operations – and logistics channels, in particular – in Canada and Australia.

It’s not a peril that is modelled as part of the traditional natural catastrophe modelling process, which raises questions as to how well the insurance industry is funding the exposure.

“We have seen repeatedly that a characteristic of wildfire events is their ability to disrupt a business when ingress or egress is put at risk or employees are displaced.”

It also represents an area where the metals and mining industry may need risk transfer solutions for events outside their properties that nonetheless impact their businesses.

We have seen repeatedly that a characteristic of wildfire events is their ability to disrupt a business when ingress or egress is put at risk or employees are displaced. And these disruptions may not be covered by conventional insurance products.

At BHSI, our catastrophe team has specific expertise in this area, and we recently quoted our first parametric wildfire solution.

We are now in a position to respond if the industry has an interest in protection from this peril beyond conventional property damage and business interruption (PDBI) insurance for their assets.

HOW HAS BHSI STRUCTURED ITS PROPERTY UNDERWRITING TEAM FOR MINING AND METALS OPERATIONS?

We have a global team of mining and metals specialists in our energy teams around the world, in London, Houston, Toronto, Sydney, Perth and Singapore.

While we focus on aligning local underwriting teams with local customers, we are a collaborative team that is always sharing information and learning from our global experience so we deliver excellent and consistent service for our customers and brokers around the world.

WHAT IS YOUR APPETITE IN THE MINING AND METALS SPACE?

Our goal is to be a meaningful partner to customers across these industries - from major diversified multinationals and multibillion-dollar projects to niche, single-site operations.

Our appetite is high where we believe that we can be a sustainable long-term participant, have confidence that we understand the exposures presented to us, and the terms and conditions we agree on are balanced.

“We remain a somewhat selective insurer as we believe that not all exposures are adequately priced by the insurance market”

We are very focused on developing credible perspectives on the likely long-term cost of risk for assets so that we can participate in a sustainable fashion.

This does mean that, notwithstanding recent insurance market hardening, we remain a somewhat selective insurer as we believe that not all exposures are adequately priced by the insurance market.

WHAT CHANGES HAVE YOU SEEN IN THE MINING INDUSTRY?

Mining operations are always looking for new ways to become more efficient and profitable, which may often mean scaling up, adopting new technologies, and making the necessary investments to meet the world’s evolving commodity demands.

Ore grade decline is driving the industry towards higher volume operations and technology solutions for tough-to-treat ores.

This can make risks larger and more complex – but at the same time, we see from many operations a keen focus on improved risk governance and very strong, hard-won improvements in safety performance in recent years.

“Mining operations are always looking for new ways to become more efficient and profitable”

At BHSI, it is a question of digging in and understanding our customers and their risks, collecting increasingly available risk and performance data, and getting to that critical level of confidence that we understand a risk sufficiently to build a long-term partnership with our customer.

BHSI has so much to offer the mining and metals industries – including our desire to truly see through volatility to the long-term cost of risk, our financial strength, and our CLAIM IS OUR PRODUCT philosophy.

We are excited about the future of these sectors and continuing to grow our operation along with them.