By Suzanne Barlyn
Jan 21 - The 2019 mining disaster in Brazil is expected to
lead to a double-digit jump in costs to insure U.S. tailings
dams that store mining waste against liability for environmental
catastrophes.
Tailings dams, some of which tower dozens of meters high and
stretch for several kilometers (miles), are the most common
waste-disposal method for mining companies, whether they extract
iron ore, gold or copper.
The deadly collapse last January of the dam at Vale SA's
Corrego do Feijao iron ore mine in Brumadinho rocked
the mining industry and spurred calls for massive operational
changes. At least 259 people were killed https://www.reuters.com/article/us-vale-sa-disaster-exclusive/exclusive-brazil-prosecutor-aims-to-charge-vale-within-days-over-mining-waste-dam-disaster-idUSKBN1Z72GS
in the incident.
Following the disaster, miners in the United States can now
expect to pay 10% to 20% more to secure environmental and
pollution coverage for tailings dams when policies come up for
renewal, and securing that coverage has become more challenging,
insurance broker Willis Towers Watson (Willis) said.
That cost rise was expected, and mining companies are set to
fork out more for property and liability insurance as fewer
insurers are willing to cover the riskiest aspects of the mining
business.
In an industry beset with tight margins, such cost hikes are
not ideal.
The United States has the second-largest number of tailings
dams built using an architectural method considered unsafe by
many engineers, according to a Reuters analysis of industry
data.
Insurers had already begun taking steps to curb their
tailings dam exposure before the Vale disaster, in the wake of
at least three major dam failures globally in the past six
years.
"The market has become much more risk (averse) and scrutiny
is increasing," said Andrew Wheeler, who heads the mining and
natural resource practice at Willis.
Vale expects to pay about $8 billion (33.1 billion Brazilian
reais) in total costs by 2031, including compensation for
"material and moral damages" and efforts to clean and restore
the region.
The Vale disaster has encouraged insurers to become
sticklers over the wording of all types of mining policies,
including property damage, business interruption and potential
legal liabilities.
For example, if a policy covers $50 million for debris
removal and $100 million for the loss of a tailings facility,
insurers want to make it clear that a company cannot collect
both amounts.
Last May, American International Group, Inc said it
would no longer write any pollution liability coverage for
global mining and tailings risks, according to Willis.
An AIG spokesman declined to comment on the change, which
followed AIG's earlier exit from writing U.S. and Canadian
pollution liability coverage.
(Reporting by Suzanne Barlyn; Additional reporting by Carolyn
Cohn and Noor Zainab Hussain; Editing by Ernest Scheyder and
Bernadette Baum)