General Liability: An underestimated risk to your business?

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2 General Liability: An underestimated risk to your business? 1. Introduction 2. Mining Industry concerns 3. Limits 4. Coverage 5. Marketing 6. Conclusions

3 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!

4 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)

5 Communication: The key to preventing accidents? Chilean mina (coloquial: mujer) English (noun) girl Eg. Esa mina es muy rica! That girl is very attractive!

6 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

7 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

8 Example: Hungary: 2010 Tailings Dam Failure at Alumina Plant 10 dead. 150 Injured Government spent USD 166m on clean up

9 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)

10 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.

11 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.)

12 Fatal Accidents in the Mining Operations Peru & Chile Ministerio de Energía y Minas, Perú & Servicio Nacional de Geología y Minería, Chile

13 Court Awards for Death of Employees (Chile)

14 Payments for injury of employees or contractors (Chile) Year Injuries Settlement USD 2009 Quadriplegic Daño moral 630,000 Lost earnings 200,000 Total 830, Serious Injuries Daño moral 475,000 Lost earnings 70,000 Total 545, % of incapacity Daño moral 285,000 Total 285, % of incapacity Daño moral 165,000 Total 165,000

15 Are you buying enough limit? Justifiable to management/shareholders? Combination of the following should be considered: Estimated maximum loss Actuarial analysis Engineering based study Market Capacity Benchmarking against peers

16 Global Liability Capacity

17 Theoretical vs Realistic Capacity 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 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.

18 Mining Liability Limits Benchmarking Client Type Country Revenue (USD) Limit of Liability (USD) Deductible (USD) A B C D E F G H Underground and Open Cast. Base Metals and Coal Underground and Open Cast Base Metals and Precious Metals Mining, Refining, Rail, Exports Open Cast Base Metal and Coal Open Cast Mining Precious Metals Open Cast Precious Metals Open Cast and Underground Mining Base Metals Open Cast Mining Base Metals Latin America >3,000,000, ,000,000 Variable Latin America 850,000,000 50,000,000 50,000 Europe/Asia 9,000,000, ,000,000 50,000 Latin America 150,000,000 75,000,000 25,000 North America 1,000,000, ,000,000 50,000 Latin America 6,000,000, ,000,000 25,000 North America 8,000,000, ,000,000 25,000 Latin America 2,000,000,000 15,000,000 25,000/100,000

19 Does your coverage suit your needs? 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

20 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

21 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

22 Wording Benchmarking Traffic Light Analysis 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

23 Does your coverage suit your needs? What's not covered Director s and Officer s Liability Gradual Pollution Occupational Disease 1 st Party Pollution Mining Rescue Expenses

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

25 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

26 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

27 Muchas Gracias!

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