Australia Mining Market

16 August 2016

In line with global market conditions, the Australian mining market remains well capitalised and competitive but recent losses, albeit not catastrophic, have eroded property and casualty underwriting performance to the extent that some insurers have reconsidered levels of participation that were considered attractive in 2014-15. For Property insurers, Contingent Business Interruption (CBI) exposures and offshore risks are the principal source of resistance and the levels of sustaining capital committed by mining companies are closely scrutinised during underwriter’s risk selection reviews. For Casualty underwriters, it is bush fire and tailings storage facility (TSF) failure that limits deployable capacity but a reduced reliance on contractors, whilst project activity is limited, is seen as a favourable development. 

Alongside these risk-based changes in dynamics, corporate activity amongst insurers has led to different options and solutions being required for 2016 renewals. Axis and Munich Re (Great Lakes) have both withdrawn or reduced their local market presence whilst Berkshire Hathaway Specialty (BHSI), Axa and Argenta have entered the market and grown significantly from both a retail and reinsurance perspective. Since CGU’s acquisition of Lumley, M&A activity continues and has led to the consolidation of Ace & Chubb and XL & Catlin so harnessing the positive aspects of these developments remains an active challenge.

In addition to local Australian markets we have also seen a trend in the past 12-24 months where Chinese Insurers have shown interest in the Mining sector, particularly from Huatai, Ping An, PICC, CPIC. This has been most notable on accounts that have an element of Chinese ownership where they tend deploy more aggressive capacity. This is an emerging market that is still developing, but their capacity is large and they are flexible when it comes to policy form which is useful and unique in the Mining sector. Certainly a trend in the market that we should all monitor/engage going forward.

Mining risks are considered complex by underwriters whether they are large or small and commodity price fluctuations, divestments, and the mothballing of assets has ensured that few companies renew their programmes on a like-for-like basis. However, despite these market developments, positive renewal outcomes in terms of cover and pricing remain available for mining clients whose individual merits are differentiated from their peers and whose risk is well presented to the market in a timely fashion.

This market update is part of a 10 part series. A PDF of all 10 articles will be available after publication. 

For further information, please contact Damian Schinck, Managing Director, Corporate Risks, JLT Australia on +61 3 9613 1429 or email damian.schinck@jlta.com.au

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contact Damian Schinck
Managing Director, Corporate Risks, JLT Australia damian.schinck@jlta.com.au