The world’s need and desire for mined material of all sorts shows no sign of abating, but mining operations are now facing new challenges and new loss exposures.
From the location of the mine itself, the difficult surroundings, to the complexity of supply chains, all these factors impact a miner’s risk profile and the subsequent insurance needs.
Go deeper with GlobalData
As such, securing “comprehensive and affordable insurance is always a difficult task in mining, which is an inherently risky sector,” says Peter Finan, managing principal of international law company Serus Legal.
Many of these risks involve operational, environmental and geopolitical issues. In addition, the “exploitation process often involves dangerous activities, including drilling, explosives [and] underground work which do not exist in other sectors”. In addition, the mines are often found in remote and difficult locations.
Finan adds: “Events such as floods, wildfires, and droughts – climate-driven or not – are increasingly disrupting operations and supply chains, and I understand these risks are often excluded or capped in policies.”
He adds that several issues worry insurers in the mining sector. The main areas of concern are tailings dam failures, climate-related issues, severe events impacting operations and supply chains, geopolitical instability or frequent regulatory changes (both legal and fiscal) undermining project stability.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataEnvironmental, social and governance (ESG) compliance is also a growing issue, with projects lacking a credible sustainability strategy being avoided by insurers and investors, particularly in the critical minerals space.
Types of insurance required in mining
First on the list is public liability insurance. In mining, the risk of an accident is relatively high, and the extent of the injuries could be extensive. The cost of this damage, not least in terms of lost income, could be staggering.
Then comes professional indemnity insurance, which will protect a business if it is sued for damages because of the professional services that have been offered.
Third, plant and equipment insurance is required if a mine operator is using its own plant or equipment, covering damage, theft and liability arising from the use of the machines.
Perhaps most importantly, we come to income protection insurance. A contractor or subcontractor’s income will not be protected if they are unable to work due to sickness or accident.
Parametric insurance – which is relatively new to the insurance market and is a type of risk transfer that pays out a pre-agreed amount when a specific, pre-defined event occurs – can offer an attractive alternative solution. It fills the gaps in traditional insurance, as it does not require assessing actual damage but uses objective data sources and pre-defined parameters.
Given the prevalence of mergers and acquisitions in mining, there is also growing demand for warranties and indemnities (W&I) insurance in the UK or representations and warranties insurance in the US, according to insurance and risk management provider Lockton.
The biggest hurdle in obtaining this type of insurance rarely relates to the activity of mine itself, but rather the jurisdiction of the target. Insurers are open to covering various types of mining projects, including surface, placer, in-situ and underground, writes Lockton’s Ross Lima.
W&I insurance is a specialised insurance policy that protects against financial losses arising from breaches of warranties or indemnities in a corporate transaction. Representations and warranties (R&W) insurance is a type of insurance that protects mergers and acquisitions transactions.
Changing risks from extreme weather to geopolitics
Extreme weather events are major causes of disruption in the mining sector, says the ‘Mining Practice Insurance Market Update 2025’, from Lockton.
The environmental impact of such weather events can disrupt supply chains across different raw materials, mining sites and climatic zones. For example, flooding, following heavy rain or surges, can cause hazardous or toxic waste storage to spill and disrupt operations.
Claims arising from the mining industry are expected to increase in frequency and severity, and insurers are becoming more cautious in their underwriting approaches, particularly for tailings dams, it adds.
According to the 2024 mining market update from Marsh, another insurance broker and risk adviser, Australia’s domestic mining market saw “significant losses due to weather events in [2024 and] these losses prompted increased scrutiny of policy terms, conditions, and operating protocols”.
While political risk is always present, recent actions in Mali and some other countries “appear to exceed the risk appetite of most (if not all) insurers,” says Finan.
He explains that “resource nationalism has always been a risk – particularly in Latin America, Africa, and parts of Asia – and raises the threat of expropriation, additional taxes, revocation of mining rights, or forced joint ventures. These risks typically fall under ‘political risk insurance’, which is available but expensive and limited in scope”.
Finan adds: “The Ukraine conflict, US–China tensions, instability in Africa (notably Mali and Burkina Faso, but also South Africa in recent years), show the risk can be real.”
However, he comments that some projects in regions subject to great political instability have been left untouched, as new rulers will generally see the benefits in having the project operating as normal.
Finan states: “They don’t want to stop the golden goose from laying its golden eggs.
“On the flip side, we have also seen mining companies abandon their projects due to instability, most recently in the eastern Democratic Republic of Congo (DRC), so the risk remains and is sometimes insurmountable.”
Cyber incidents: a growing threat for mining
While there were fewer cyber claim notifications in the first half of 2024 compared to the same period in 2023, says Marsh, claims increased following the CrowdStrike incident in July 2024, when a large-scale tech failure caused travel chaos around the world.
The cybersecurity company later admitted that the problem was caused by an update to its antivirus software.
As cyberattacks become a more prevalent form of economic disruption and a political risk factor, the mining industry – crucial to the global supply chain – has increasingly been targeted.
Jeff Pick, director of cybersecurity architecture and operations at Freeport-McMoRan, a major US-based mining company, previously told Mining Technology: “Common attacks range from password spraying and brute forcing to social engineering and phishing/vishing campaigns. As most organisations now recognise, the question isn’t if a cyber event will occur, it is when.”
The evolving insurance market
According to ‘Mining Insurance Market Update 2024’ from Gallagher, a large insurance brokerage and risk management company, underwriters will continue to focus on multiple elements of risk engineering and risk quality, heavily influenced by recent claim scenarios, relating to such topics as critical spares, condition monitoring, structural integrity and supply chain security.
Late last year, primary and reinsurance broker Willis Towers Watson wrote that the “mining sector has sustained heavy losses, overturning the streak of profitability that property insurance markets have sustained for several years [while] the mining sector and (re)insurers are acutely aware of emerging risks such as technologies and geopolitical pressures”.
But, emerging risks “cannot simply be fed into a standard risk framework, and future-ready mining businesses are exploring new ways to identify and address changing exposures”. The report added that competition among insurers “to back the most resilient mining businesses is heating up”.
Timothy L Foden, co-head of the International Arbitration Practice Group and partner at Boies Schiller Flexner (UK) LLP, adds that sovereign risk insurance products have remarkably expensive premiums and invariably lead to fights over coverage.
Foden says: “Often, the insured has to go to arbitration with the insurer over coverage and even if they win, they are then required to participate in an arbitration against the sovereign afterwards in an attempt to recoup the insurance payout.
“In those circumstances, we counsel our clients to forego insurance and just structure their investments in the country to ensure coverage by a bilateral or multilateral investment treaty.”
Then there is the issue of changing local legislation, as exemplified earlier this year by Barrick Mining’s decision to exclude its Mali gold complex from its 2025 production forecast, as tensions rise from a two-year dispute over new mining legislation in the country.
The Loulo-Gounkoto complex has faced operational delays since January due to actions by Mali’s military-led government, including blocking gold exports, detaining staff and seizing gold stock. The latest developments come amidst negotiations for a new mining contract, with potential revenues exceeding $1bn at risk for both parties.
