Mining risks: loss planning and scenario testing

28 July 2015

Many of the common losses in mining could be minimised through loss planning and scenario testing, which help to ensure that insurance and mitigation measures are fit for purpose when it comes to a large claim.

Loss mitigation planning and scenario testing can demonstrate how insurance coverage and claims processes will respond to specific major loss events. They can also help to identify any gaps in cover and make the insurance spend more effective. Jon Haysom, head of energy claims at JLT Specialty, says: “Only when large losses happen do the deficiencies in policy wordings and mitigation surface. As robust as your risk management might be, you will never know exactly how resilient your operations are until you are hit by a large loss “Therefore, it is crucial to learn from losses and claims in the market and ensure that insurance policies respond as they should. Even where they are not covered, loss planning enables mining clients to know where they stand and not rely on ambiguous wordings and market relationships.” 

Nick Entwistle, partner at Echelon Claims Consultants, adds: “We have seen clients that are confident in their supply chain analysis, but when they tested it against their insurance, they discovered weaknesses and were forced to revaluate. More often than not, scenario loss planning will uncover any misunderstandings or mismatches in cover, demonstrating how cover will respond in a loss situation. This can lead to discussions on amendments to cover, increased cover or plans for loss mitigation.”

“Planning for losses is about creating an ethos around the claims process, rather than a way of capturing every potential loss scenario,” says Adrian Brennan, partner at Echelon Claims Consultants. “Often it is the most obscure of risks that were not even on the horizon that create the biggest problems. But through loss planning it is possible to cultivate an organisation’s ability to deal with abnormal situations.” 

The mining industry has become considerably more proactive in its approach to understanding and planning for risk reduction and loss mitigation in recent years, says Plaisted. “Larger companies have extensive risk management operations and use well developed sophisticated practices to audit their major hazard exposures.”

Smaller mining companies may not have these resources but are increasingly seeking the input of external consultants. “We have carried out extensive work with many mining companies on risk identification and mitigation, and while some are better than others, there is a lot of very positive action,” he says. “One benefit of today’s competitive insurance market is that insurers are looking to differentiate themselves and will be more prepared to help clients with scenario planning, as well as policy testing and claims protocols,” says Haysom.

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For further information, please contact Simon Delchar, CEO, Property, Casualty, Mining & Power on +44 (0)20 7466 6226