Mining Risks - D&O

06 October 2016

Corporate wrongdoing is once again back in the spotlight. Directors’ and officers’ (D&O) insurers are closely watching several cases, particularly the Samarco disaster. In addition corruption allegations against Petrobras are likely to generate significant defence costs and damages and create potentially contentious claims for D&O insurers.

The D&O market, like so many others, continues to soften, but the mining sector has seen some turmoil over the past year with an increase in the number of notifications and claims being paid linked to underlying commodity prices falling – although this is more the case with those mining companies at operational phase.

We have seen some exploration and operational gold mining companies that have had some cash flow issues over the past few years that have seen some claims arise from investors. Companies with gold mining as a strong focus are generally preferred by insurers at this point.

The D&O market on the whole continues to be dominated by oversupply of capacity, which is keeping rates depressed, although primary insurers are looking to increase rates, where justified, on a risk-specific basis. Recently the D&O market has also seen a growing disconnect between primary and excess premium rates – while primary insurers deal with directors’ initial defence costs, these costs typically do not affect the excess markets. When facing the prospect of notifying a D&O claim, ensure you engage with insurers at the appropriate levels within the organisation and give careful consideration to the drafting of the notice and subsequent communication.

Tip for buyers

The UK D&O insurance market is still incredibly soft, and an oversupply of capacity continues to drive competitive tension. Buyers should look at the sustainability of their insurance programmes, from both an insurer capacity and pricing perspective.

For further information, please contact Kurt Rothmann, Head of D&O, JLT Specialty on kurt_rothmann@jltgroup.com

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contact Kurt Rothmann
Head of D&O, JLT Specialty kurt_rothmann@jltgroup.com