One of the challenges with insurance valuations of Australian mining assets is reflecting the unique characteristics such as often-remote locations.
There are a number of reasons why existing sums insured may need a detailed review in the current climate:
- Capital investment in the mining sector has changed significantly over recent years. Costs and EPC margins have fluctuated rapidly as a result
- The impact of Covid, and connected changes in global supply chains, has increased equipment and labour costs. Construction/equipment lead times have also changed
- Foreign exchange movements, and significant changes in global logistics costs, are impacting costs for overseas sourced assets
- Commodities integral to mining facilities such as steel have seen unprecedented cost increases over the last 12 months
- Insurance policy terms, particularly average clauses and inclusions / exclusions are being tightened. As insurers seek to reduce losses, asset owners are facing increased risks.
Assessing current costs is more challenging than ever. Global supply chains are being disrupted by travel restrictions, trade disputes, changing government priorities, and shifting market demand.
Supply of construction materials and equipment has being particularly constrained. As a consequence these costs are rising more rapidly than general prices. This will have a knock on effect on mining reconstruction costs.
The recent flurry of national budgets around the world announcing increased capital expenditure is likely to have a tangible impact on asset prices over the next 12 months and beyond.
An increased demand from insurers for extensive and accurate independent information on values at risk during policy renewals and after losses is making this issue more important than ever for risk managers.
Access the full document on our approach to insurance valuations of Australian mining assets below. For further details of our mining expertise, click here.