spRING 2011 GlobAl MARKETs INTERNATIoNAl - Willis

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terrorIsm geNeRal MaRket oveRvieW Despite indications in early 2010 that the terrorism insurance market had bottomed out, we are still seeing a decline in rates. This can be attributed to a number of factors, but is primarily due to over capacity in the market. In 2010 we saw a number of new markets writing terrorism business. This new capacity was somewhat tempered by the decrease in capacity by some of the larger terrorism underwriters. Also the predicted increases in the cost of underwriter’s reinsurance treaties did not materialise. In 2010 the terrorism market saw more claims activity than in previous years with a number of significant losses being reported. Some of the more notable events include a Russian hydroelectric plant and riots in Thailand, the two of which contributed an estimated half a billion dollars. With these points considered, the overall capacity in the standalone market is still estimated at around USD 175 billion. Whilst the core of the terrorism market is focussed on property damage and business interruption coverage, there has been an increasing interest in liability and employers liability terrorism, as multinational companies face concern over gaps in cover where terrorism is often excluded. To a lesser extent, buyback for Nuclear, Biological and Chemical terrorism has also increased, although this has not developed at the same pace as other terrorism products, mainly due to a lack of reinsurance capacity and the very limited markets available that can write this business. David Guest, the terrorism class underwriter at Hiscox, commented on the way in which the mining terrorism market has developed “ New discoveries are taking our mining clients into less familiar territories and are being forced to manage less familiar ‘above ground’ issues. We are looking to deal with clients who try and manage and mitigate these risks. Security risks, social and reputational issues can all impact on the broad political violence cover we write. Strikes, riot and civil commotion are common in certain areas. In others, changes of government and subsequent policy changes can lead to increased risk”. Due to the nature of the exposure, underwriters are increasingly requiring more detailed underwriting information particularly in relation to security. 6 | Willis | Mining Market Review 2011 teRRoRisM aNd PolitiCal violeNCe aCtivity iN the MiNiNg seCtoR 2010 witnessed some activity within the Mining sector for Terrorism and Political violence. Incidents arose from activities connected to pay disputes and work force conditions, or localised opposition to mining operations. Geographically, some of the regions which have shown activity include: Colombia: Albania, La Guajira. FARC rebels sabotaged machinery at the El Cerrejon coal mine. Despite incidents such as this, there has been a marked fall in guerrilla violence in the northeast province of Antioquia. The region has a history of FARC and ELN guerrilla activity, but the ELN has now been pretty much eliminated from the region, and the FARC has been weakened by the death of its main commander. However, the FARC is still launching attacks, although perhaps not of the magnitude of the past. Although there is an overall decline in activities, there has been a resurgence in new paramilitary groups such as Rastrojos, Urabenos and Paisas. Peru: There have been a number of recent high-profile attacks by Shining Path rebels, which presents a threat to the Mining sector. The government is overhauling its counter-insurgency strategy effort with a government proposal to augment current funding by future mining tax revenues.
Democratic Republic of Congo (DRC): The Democratic Forces for the Liberation of Rwanda (FDLR) are becoming an increasing threat within eastern Congo, posing an increased risk to mining operations. In February 2010 the FDLR rebels attacked a mining site in Nkumwa, Maniema, killing two soldiers, taking 50 civilians hostage and stealing a tonne of cassiterite. Niger: For the first time, Al-Qaeda in the Islamic Maghreb (AQIM) group expressed a view that uranium mining represents a theft of Muslim resources, alongside oil and gas extraction. This signifies the group’s shift in focus southwards to mining areas in the Sahel, following its failure to inflict damage on Algeria’s energy industry. " In 2010 tHe terrorIsm market saw more ClaIms aCtIVIty tHan In PreVIous years wItH a numBer of sIgnIfICant losses BeIng rePorted Into tHe market" Willis | Mining Market Review 2011 | 65
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MINING MARKET REVIEW spRING 2011 Gl
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IntroduCtIon
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" tHe InsuranCe market remaIns tHe
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exClusIVe ProPerty damage/BusIness
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Isk management
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Page 20 and 21: ClaIms The mining claims service an
Page 23 and 24: ConstruCtIon
Page 25: The Mining industry will continue t
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Page 35: “ tHere Is no questIon tHat safet
Page 38 and 39: marIne CaRgo In 2009 our message wa
Page 40 and 41: marIne CoMModity tRadiNg Perhaps mo
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Page 45: " tHe return of demand and InCreasI
Page 48 and 49: sPeCIal ContIngenCy rIsks The natur
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Page 55 and 56: ReCeNt eNhaNCeMeNts Increasingly, m
Page 60 and 61: PolItICal rIsks iNtRoduCtioN The Mi
Page 62 and 63: PolItICal rIsks soMe ReCeNt MiNiNg
Page 65: terrorIsm & PolItICal VIolenCe
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Page 75 and 76: sustaInaBIlIty
Page 77 and 78: Who aRe the stakeholdeRs, aNd What
Page 79 and 80: iNteRNatioNal FoRCes The origin of
Page 84 and 85: InterVIew on m&a and rIsk managemen
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Page 93 and 94: dIsaster management
Page 95 and 96: When your HR people interview prosp
Page 97 and 98: When things go majorly wrong, organ
Page 99 and 100: Copyright and disClaimer: © Copyri
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