General Liability: An underestimated risk to your business?

1. Introduction

2. Mining Industry concerns

3. Limits

4. Coverage

5. Marketing

6. Conclusions

Communication: The key to preventing accidents?

Spanish Hola! Como está? Yo me llamo …….. Pisco viene de solo un pais y ese pais es Perú! English Hello! How are you? My name is ………… Pisco only comes from one country and that country is Peru!

Communication: The key to preventing accidents?

Spanish mina (lugar: excavado, subterráneo) English (noun) mine Eg. Esa mina es muy rica That mine is very rich (in minerals)

Communication: The key to preventing accidents?

Chilean mina (coloquial: mujer) English (noun) girl Eg. Esa mina es muy rica! That girl is very “attractive”!

What is the greatest concern of mining companies when it comes to Third party liability?

1. Pollution following tailings dam failure

2. Accident involving multiple injuries or deaths to employees or contractors

1. Pollution: particularly following tailings dam failure

Claims for which cover is available under a third party liability programme: Third party damage caused by the pollution Clean up of damaged third party property Injury to third parties or employees caused by the pollution

Example:

Hungary: 2010 Tailings Dam Failure

at Alumina Plant 10 dead. 150 Injured Government spent

USD 166m on clean up

2. Multiple injury/death of employees/contractors

Claims for which cover is available under a third party liability programme: Any injury to or death of an employee or contractor

(occupational disease usually excluded)

Example 1

West Virginia, USA: 2010

Explosion in Massey Energy's Upper Big Branch coal mine.

29 out of 31 miners at the site killed.

Example 2

New Zealand: 2010 Coal mine exploded.

Twenty-nine men underground died from the blast or from the toxic atmosphere.

2 men in the stone drift, some distance from the mine workings, managed to escape.

(Extract from Royal Commission of Enquiry Report on Pike River.)

Fatal Accidents in the Mining Operations Peru & Chile 2006-14

Ministerio de Energía y Minas, Perú & Servicio Nacional de Geología y Minería, Chile

Court Awards for Death of Employees 2002-2012 (Chile)

Payments for injury of employees or contractors (Chile)

Year Injuries Settlement USD

2009 Quadriplegic Daño moral 630,000

Lost earnings 200,000

Total 830,000

2010 Serious Injuries Daño moral 475,000

Lost earnings 70,000

Total 545,000

2010 80% of incapacity Daño moral 285,000

Total 285,000

2010 50% of incapacity Daño moral 165,000

Total 165,000

Justifiable to management/shareholders? Combination of the following should be considered:

Estimated maximum loss Actuarial analysis Engineering based study

Market Capacity Benchmarking against peers

Are you buying enough limit?

Global Liability Capacity

NB: Supply and Demand conditions operate: The greater the limit required, the greater the pressure on price, as the most economic capacity used up first.

Theoretical Market Capacity

$ 2.8 billion Realistic

Mining Capacity

$1.4 billion

Realistic Underground Mining

Capacity

$ 800 million – $ 1.0 billion

Underground Mining Follow form

Capacity $ 500 m

Theoretical vs Realistic Capacity

Mining Liability Limits Benchmarking Client Type Country Revenue (USD) Limit of

Liability (USD)

Deductible

(USD)

A Underground and Open Cast.

Base Metals and Coal Latin America >3,000,000,000 100,000,000 Variable

B Underground and Open Cast

Base Metals and Precious Metals

Latin America 850,000,000 50,000,000 50,000

C Mining, Refining, Rail, Exports Europe/Asia 9,000,000,000 100,000,000 50,000

D Open Cast

Base Metal and Coal Latin America 150,000,000 75,000,000 25,000

E Open Cast Mining

Precious Metals North America 1,000,000,000 250,000,000 50,000

F Open Cast

Precious Metals Latin America 6,000,000,000 100,000,000 25,000

G Open Cast and Underground Mining

Base Metals North America 8,000,000,000 200,000,000 25,000

H Open Cast Mining

Base Metals Latin America 2,000,000,000 15,000,000 25,000/100,000

Standard Mining Liability Coverages

1. Public/General Liability – arising from premises/operations 2. Products Liability – arising from products sold or supplied 3. Pollution Liability – arising from damage to the environment (typically restricted to sudden & accidental) 4. Excess Auto Liability – arising from the ownership or use of 5. Excess Employer’s Liability – for injury to an employee at work

Does your coverage suit your needs?

Does your coverage suit your needs? Clean-up costs

Pollution language

Injury language: “daños morales”

Deductibles: EL deductible “per person” or “per event”

Employees vs Contractors cover

“all risks” or “named perils”

Sublimits

Exclusions for underground mining or handling of explosives

Wordings Benchmarking Wordings reviews and projects to work on enhancements of current

policy wordings

“Traffic Light” coding on wording benchmarks on the extent of coverage of one client’s policy compared to 5 peers

Wordings Workshops taking place in London or abroad covering subjects such as: Primary, Excess of Loss and Umbrella Policies (and their meanings) Difference in coverage between London, Bermuda and International

Forms “Best Terms” and other hidden restrictions to look out for in clients

wordings and indeed your own quotations obtained

Diagram above a snap-shot of a typical wordings benchmark where one client’s current wording can be compared against up to 6 other mining / natural resources companies, globally

Wording Benchmarking “Traffic Light” Analysis

Director’s and Officer’s Liability

Gradual Pollution

Occupational Disease

1st Party Pollution

Mining Rescue Expenses

Does your coverage suit your needs? What's not covered

How do you sell your liability risk? In the general liability market, you have to paint a picture

How do you sell your risk? Information is key Health and Safety Procedures Use, storage and handling of explosives and chemicals Underground operations Numbers of employees/contractors underground at any one time Tailings Dams “Reward Culture” for incident reporting Use of railways – transportation of waste/product/process chemicals Claims Record

Market Dynamics Intelligent Marketing Primary and excess capacity Local and international capacity

Conclusion – the smart way to save money

Save money by not paying claims yourself Buy a suitable limit Establish the correct retention strategy Ensure breadth and consistency of coverage

Save money on premiums through intelligent marketing

Muchas Gracias!