Major Causes of Mining Losses in The Last Half Decade

Mining is the backbone of most of Africa’s economies.

From an insurance and risk perspective, there are a number of risks associated with different types of mining operations – either surface or underground. These include gaseous build up, explosions, natural and mine-induced seismic activities as well as risks associated with underground mining.

Maksure Risk Solutions has over the last half a decade spent much of its time assisting large corporates estimate and structure risk mitigating and insurance solutions to manage material damage and business interruption claims.  Maksure Risk Solutions’ approach places a strong emphasis on prevention using a risk-based inspection methodology. But when the preventative measures fail, the insurance policy is the final mitigation tool (and safety net) to a major financial loss.

The major causes of mining losses from our analysis over the last 5 years are:

  • Conveyor Systems failure due to friction;
  • Breakdown of crushing equipment;
  • Fires in underground workshops where there tends to be a large accumulation of equipment/machinery;
  • Substations (fire) and pumping equipment (breakdown resulting in flooding);
  • In geographical regions with seismic activity, earthquake losses are topical.

The business interruption loss potential is usually huge and contributes significantly to the amount of the insured loss.  It is critical that miners engage the service of experienced insurance and reinsurance brokers such as Maksure Risk Solutions in structuring their insurance covers and establishment of their Maximum Possible Loss.

For more information regarding our structured risk solutions, contact our Head: Engineering & Mining, Mr Stephen Makwembere at +27 11 805 0086 or email info@maksure.co.za.

About Maksure Risk Solutions

Maksure Risk Solutions is an Afro-Global independent specialist insurance and reinsurance broker with business footprint in Africa, Asia, East & Western Europe, South America and the Caribbean. We provide innovative and tailor-made risk solutions in Insurance and Reinsurance as well as Risk Financing and Actuarial Consulting geared towards capital management and strengthening our client’s balance sheet. Maksure is also one of the major players in Captive Management (Establishment & Management) in South Africa, Mauritius, Bermuda and various other jurisdictions. We have access into the Lloyds of London with a deep understanding of African markets. Our global nature ensures that our clients access quality capacity as well as some of the world’s latest thinking and solutions.

Maksure Risk Solutions Represented at This Year’s Mining Indaba

Our Head of Engineering, Mr Stephen Makwembere and team will be attending the Mining Indaba, the world’s largest mining investment event to be held on the 3rd and 4th of February 2020 at CTICC, Cape Town, South Africa.

Maksure Risk Solutions has vast experience in structuring, placement and risk management of mining operations across the African continent. Our mining experts will be ready to engage with you at the conference, so be sure to send us an email to book an appointment with us on info@maksure.co.za.

Our mining and engineering solutions include strategic advisory on developing bankable feasibility studies, insurance and reinsurance products such as financial guarantees, construction all risk, operational risk, liabilities as well as risk management services.

Be sure to meet our representative at the indaba!

Case Study: Innovative Reinsurance Solutions

 

The Challenge

Our client, an underwriting manager (UMA) in South Africa writing general personal and commercial insurance was having challenges with their solvency/ capital position given the new risk-based solvency regime for the South African long-term and short-term insurance industries. The UMA’s portfolio was well balanced and highly profitable with a traditional risk and catastrophe excess of loss protection. The challenge that our client had was that applying the new risk-based solvency calculation exposed the UMA to a huge capital shortfall in their cell captive which led to a massive capital charge from the cell captive insurer rendering the business uneconomic.

Maksure’s Structured Solution

Maksure structured a tailor made reinsurance solution for the UMA which integrated the existing risk and catastrophe excess of loss and a finite quota share structure. The finite quota share was crafted to provide capital relief. A huge swing sliding scale ensured that the UMA would be responsible for its own underwriting loss as well as “bank” the underwriting profits. ‘A’ rated reinsurers in the “equivalent jurisdictions” were utilised as they provided a lower credit risk capital charge.

Conclusion

By integrating our unique technical skills in risk financing and reinsurance as well as world class reinsurer relationships, Maksure Risk Solutions is able to deliver world class insurance and reinsurance solutions that are tailor made to solve individual client unique challenges.

For more information regarding our structured risk solutions, contact our Managing Director, Mr Simba Makwembere at +27 11 805 0086.

About Maksure Risk Solutions

Maksure Risk Solutions is an Afro-Global independent specialist insurance and reinsurance broker with business footprint in Africa, Asia, East & Western Europe, South America and the Caribbean. We provide innovative and tailor-made risk solutions in Insurance and Reinsurance as well as Risk Financing and Actuarial Consulting geared towards capital management and strengthening our client’s balance sheet. Maksure is also one of the major players in Captive Management (Establishment & Management) in South Africa, Mauritius, Bermuda and various other jurisdictions. We have access into the Lloyds of London with a deep understanding of African markets. Our global nature ensures that our clients access quality capacity as well as some of the world’s latest thinking and solutions.

MakReview: Maksure’s 1/1 Market Insights

We noted that the reinsurers were judgmental during the 1.1.2020 reinsurance renewals. This culminated to a large extent significant pricing, capacity and conditions variance depending on cedant’s past performance, class of business, geography, risk tolerance and relationships. There was also a significantly varying degree of interest and capacity available for direct business and retro business. Capacity was generally available in direct insurer’s treaty business compared to retrocession business.  This resulted in direct insurers treaties concluded in time while the retrocession business was concluded very late into the renewal season.

Key Insights

 

  • Reinsurers were judgemental leading to significant pricing, capacity and conditions variance depending on cedant’s past performance, class of business, geography, risk tolerance and relationships.
  • In the catastrophe reinsurance market, the effects of NatCats such as the Cyclone Idai in the southern African region was felt as reinsurers sought price adjustments for loss-impacted programs in peak zones as such as Mozambique. Facultative capacity was limited with reinsurers pushing for price increases and limiting cyclone coverage.
  • Continued interest of African reinsurance business by international reinsurance players was felt, however, the deployment of capacity by same was limited due to markets familiarising with the risks, building relationships and to some extent data quality challenges.
  • Underground mining and Agriculture business risk exposures continue to pose challenges as reinsurers have limited risk appetite for the class of business due to previous loss record. This challenge continues to be tropical as Africa’s economies are largely made up of mineral extraction and agriculture.
  • Capacity for retrocessional covers by international A rated markets has been in shorter supply as most reinsurers were derisking as they preferred to write direct business and limit their accumulation risk exposure. These shifting market dynamics culminated in retrocession rate increases and reduction in reinsurance commissions across several classes of business, albeit marked distinctions depending on performance, class of business, structures, risk tolerances and relationships.
  • Retrocessional capacity for clients that largely write from one country or region as well as those regions that protect against direct writing by international players was available at reasonably good terms.
  • On the balance the 1/1/2020 renewal season was a balanced renewal with those insurers with good performing books benefiting from good terms while those with poor performing books receiving penal terms.

“The African reinsurance market is undergoing some significant changes culminating from loss pattern changes, risk quantification strategies by international players as well as reinsurers’ risk appetites adjustments,” said Simba Makwembere, Managing Director of Maksure Risk Solutions. “These changing dynamics are expected to continue into the future and requires reinsurance brokers that elevates their clients’ risk management strategies to proactively manage loss performance, capability to quantity and model client’s risk exposures as well as deep technical capability and global relationships.”

Maksure Invests in Weather and Climate Monitoring Equipment

Maksure Risk Solutions has started the new decade with strong focus and commitment to weather and climate matters. The company has announced its investment of more than half a million rand in the construction of a best in its class futuristic weather station to be based in the Gauteng region. The investment is believed to improve early warning systems against extreme weather and support climate change adaptation.

“This investment is reaching out to our insurance and reinsurance clients as well as exposed populations in order to strengthen awareness, save lives and reduce the impact of extreme weather and climate-related disasters. Early warning systems are an essential part of climate change adaptation,” said Simba Makwembere Managing Director at Maksure Risk Solutions.

Our insurance and reinsurance clients will benefit. Through data and early warning systems, our reinsurance clients will be able to build resilient portfolios as they are able to model their risks better backed by actual weather and scientific data. Our retail clients which include motor, household, agriculture and SME clients will also be receiving weather data as well as weather warnings days or hours before a risky weather events.

Mr. Knighty Mawere, COO added that the retail clients will receive SMS notifications on their cellphones as well as various social media platforms including the Maksure website.

The weather station is expected to be fully functional by end of the first quarter as the project is now at implementation stage. The station will provide data related to temperature, humidity, wind speed and direction, precipitation, solar radiation, leaf wetness and atmospheric pressure among others. The output will also be fed into third party systems as well as development of historical climatic data for forecasting and weather modelling.