The transformative impact of climate change and Environmental Social Governance (ESG) is growing ever more evident according to broker Willis Towers Watson.
The broker said the pressure for cleaner energy will redefine the energy industry risk landscape, as it launched of its annual Mining Risk Review.
While COVID is having an impact on every part of the global economy the report believes that coal firms will come under greater pressure from the drive towards combating climate change and the demands of ESG.
WTW said ESG is the overarching theme in the current environment, believing the transition to a low carbon economy requires a fundamental reappraisal of mining company climate risk; the Review shows that achieving a satisfactory ESG rating will be critical in enabling mining companies to attract and maintain the support of key stakeholders in the future.
Graham Knight, Head of Global Natural Resources, Willis Towers Watson, said: “In these unprecedented times, the mining industry finds itself beset by challenges from all sides, as COVID-19 tightens its stranglehold on the global economy and insurance market conditions harden. However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry. Mining companies must incorporate ESG, above all climate change into their risk mitigation strategies in order to survive in the future.”
He added: “Mining companies need to know how the energy transition is going to affect their industry, why climate change is already transforming their industry risk landscape, how they can play a strategic role in developing their response to this transition and which ESG pressures are going to affect the industry in the future.”
The report said theoretical capacity levels remain broadly similar to last year, although line sizes continue to become increasingly restricted. While in previous years, Willis Towers Watson have reported major insurers withdrawing from coal mining risks, it seems that lobbyist pressure has now moved on to insurers’ involvement in other industries, with only one global insurer pulling out of coal this year.
The broker added it is still too early to provide full details of the significant impact that Covid-19 will have on the Liability and D&O sectors. However, following a series of disastrous losses in 2018 and 2019, the property loss record for mining seems to be improving, unlike other sectors.
Rate increases for property business, are still modest in comparison to other heavy industries, but retention levels, terms & conditions and sub-limits are all now being significantly affected by the hardening process. However, for the Liability and D&O sectors, rating increases are now much more pronounced.
It also cautioned the new levels of data required by insurers in terms of underwriting information are proving challenging to buyers; in particular, insurers’ scrutiny of their schedule of values and a growing tendency to impose price caps on both property and business interruption amounts.