The mining industry is incredibly complex and obtaining the right insurance coverage can feel like navigating a maze. With an increasingly challenging insurance marketplace, it’s important to understand where you can expect to encounter challenges. Tailings storage facilities are a key area of focus when obtaining Directors' and Officers’ Liability, Property insurance, and General Liability for mining companies. Tailings dams are the most common waste disposal methods for mines, and they also happen to be the riskiest. The use of tailings has been under scrutiny following a few catastrophic failures that have raised valid concerns. In this article, we work with our National Technical Practice Leader and Mining Risk Management expert, Dan Fitzpatrick, P.Eng., to outline the information that mining owners and executives need to know when transferring the risk of their tailings storage to the insurance marketplace. Our Mining Risk Management Expert With more than thirty-five years of experience in risk control and insurance, including the management of the Mining and Oil and Gas Extraction portfolios at several multinational insurance companies, Dan has an incredible amount of knowledge in this specialized sector. Where do these concerns stem from? What is the impact on the Insurance Market? The increased scrutiny we're observing follows the 2014 Mount Polley tailings dam collapse in Canada, the 2015 Mariana failure, and most recently, the Brumadinho failure in 2019 – the latter two taking place in Brazil with over 250 lives lost and tens of billions of dollars in damages. While these failures have taken the spotlight, tailings dam issues are nothing new. In fact, over the past decade, there have been forty-five documented failures resulting in hundreds of deaths. Despite this track record, the insurance marketplace has only begun to feel the impact of these failures in making it more difficult for mining companies to insure their risks. Since the Brumadinho failure, Mining owners and executives are seeing premiums increase more than ever before. More specifically, insurers are now asking for greater access to information - they’re including tailings exclusions, decreasing limits, or withdrawing from the market altogether. Their underwriting guidelines are now more stringent and their risk appetite is subdued – it is critical to follow a globally-approved framework and to effectively communicate risks. Implementing the Proper Framework Mining companies share insurers’ concerns about the management of tailings. The International Council on Mining and Metals (ICMM), representing twenty-three of the world’s largest mining and metals companies, has convened a task force to review standards related to the prevention of and response to sudden and catastrophic failures of tailings storage facilities. Specifically, to review standards, guidelines, and risk controls, governance, and emergency preparedness. The ICMM appointed Golder Associates to review National Guidelines and member company tailings management documentation. One of the key points stated by Golder Associates regarding the recent failures, noted above, is that “existing published guidance and standards documentation fully embrace the knowledge required to prevent such failures.” A higher level of governance is required for effective implementation of good practices. As a result, Golder Associates identified five areas of improvement for the guidelines themselves: Tailings storage classification system based on consequences of a failure Formal Management of change procedures Formal communication between the Engineer of Record, operators, and owners sharing intent and constraints of the design Formal risk assessment by suitably qualified persons and ensuring mitigation measures are embedded into the life of facility plan Independent review by suitably qualified professionals In short, the findings were that the members’ systems and guidelines currently in place are considered good practice. The primary recommendation is that a tailings management framework, supported by a governance framework, should be adopted by all members. This should be fully supported by the Board of Directors and the Chief Executive Officer to ensure that adequate resources are provided to manage and to minimize the potential for a catastrophic failure. Where Do You Go from Here? Considering the current insurance market, it is critical to communicate as much information as possible to insurers so that they are aware of how tailing storage facilities are being addressed within your mining operations. Corporate, Risk Management, Risk Control, and brokers all need to have as much knowledge as possible in order to secure the best coverage with the best terms. At EQUA, we specialize in mining insurance and Risk Management. Our experts explain risks, highlight opportunities to mitigate them, and provide consulting to help secure the best insurance coverage for your needs. Are you ready to speak with Dan about mining insurance? Email him at findoutmore@equaspecialty.com today. Dan Fitzpatrick, P.Eng., National Technical Practice Leader
