imia – wpg 61 (09) mining industry engineering insurance ...€¦ · imia – wpg 61 (09) mining...

IMIA – WPG 61 (09)

Mining IndustryEngineering Insurance Exposure

Presented at 42nd IMIA ConferenceIstanbul, 29th September 2009

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9/4/2009 2aaaaaaaaaaa

WGP 61 (09)

Working Group Members:

Matia Cazzaniga Zurich Insurance, ZürichHans Mahrla Infrassure, ZürichSteven Norcliffe Torus Insurance, LondonChristian W. Müller XL Group, ZürichBrad Dalton Vero Insurance, SydneyErik Pettersson If Insurance, Stockholm

Utz Groetschel Munich (Chairman)

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Agenda

Mining Industry - General Overview

Construction Projects

Operational Business

Open Cast Mining Illustrations

Underground Mining Illustrations

Ore Processing Plant Illustrations

Major Hazards in Mining Industry

Underwriting Mining Industry Risks

PML for Mining Industry Risks

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Mining Industry – General Overview

Mining industry is a combination of quarry operations and mineralprocessing.

Extraction of minerals or coal from ore bodies, veins and seams;

Mineral processing to make it suitable for transportation and use.

WHAT’S THE PROBLEM?

Physical condition of the mineral, its concentration in rocks or soil,

depth of the deposit, overburden conditions, geology, heavymachinery, use of hazardous substances and critical environment,…make mining a complex industry!

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In summary there is not just one issue but depending on specificcircumstances a number of problems and hazards relates to miningoperations and they can be extremely severe.

Shortage of minerals in known and well accessible deposits drivesexploration and mining in even more dangerous environments.

MINING IS A RISKY BUSINESS!

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Opencast pit collapse without any prior warning.

An area equal to 6 footballfields collapsed down to the pitbottom over a length of 350meters taking part of thesurrounding properties with it.

Slope stability issue!

Nachterstedt (Germany), July 09

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List of mining accidents over a period of 15 months in 2005/2006

Type of Loss Approx preliminary amount- SAG Mill failure US$ 270,000,000- Underground Fire US$ 88,000,000- Shovel fire US$ 108,000,000- Earth tremors US$ 15,000,000- Skip winder loss US$ 282,000,000- Long wall collapse US$ 75,000,000- Mine inundation (cyclone) US$ 330,000,000- Roof collapse US$ 78,000,000- Landslide US$ 25,000,000

(Source: AON)

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All these accidents are typical of mining industry and bothfrequency and severity (especially if ALoP/BI covered) are critical.

What is the reason for such LOSS POTENTIAL?

Mining includes many types of risky heavy works throughout construction and operation;

Special technologies/processes failure;

Local conditions (geological conditions, NatCat exposure, etc.) .

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Main construction works for establishing a green-field mine (mostlyin remote and mountainous areas):

Access road works (heavy transports);

Construction site preparation works;

Buildings and processing plant sheds civil works;

Accessing the mineral or coal deposit by heavy earthworks;

Drilling, tunnelling and shaft sinking;

Tailing disposal construction (e.g. earth/rock-fill dam).

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Main erection works for processing plants (both green-field orexpansion projects) and relevant facilities:

Power supply and telecommunication systems;

Fresh water supply and waste water sewage systems;

Fresh and compressed air supply facilities;

Processing machinery (crushing, refining, concentrating, etc.);

Transportation systems (conveyor belts and pipelines);

Storage and loading facilities (e.g. jetties).

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Operational Business

Operation of a mine includes mining (ore excavation), mineralprocessing, servicing and maintenance.

Extensive earthworks are part of the daily mining activities andSome heavy equipments themselves are continuously movingfollowing the last excavated mine field.

Handover from construction to operation, including risk transfercovered under CAR/EAR to All Risks, has to be carefully defined toassess actual exposures and to prevent any double insurance issues.

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Opencast Mining Illustrations

Open pit copper mineOpencast coal seam

Surface copper/zinc mine

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Shovel loading a dumper

Shovel working on a steep pit wall

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Dragline excavator

Bucket excavator

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Opencast Mining Illustrations The world largest bucket wheel excavator in a coal mine

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Some specifications:Built up by Krupp and operated by RWE in Germany

It stands 95 meters tall and 215 meters long

It weighs over 45,500 tons

Cost roughly US$100 million to build

Took 5 years to design & manufacture + 5 years to assemble

It requires 5 people to operate it

The Bucket Wheel is over 21 meters in diameter with 20 buckets, each of which can hold over 15cubic meters of material

It moves on 12 crawlers

It can remove over 76,455 cubic meters each day

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WHERE IS THE DOZER ???

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AT THE TOP OF THE BIG WHEEL !!!

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Copper tailings pipeline

Conveyor belt

A dump truck strugglingwith a rock…

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Tailing disposal – Downstream earth embankment

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Underground Mining Illustrations Vertical shafts provide access to underground mines and/or connectdifferent levels.Shafts are usually divided into several sections for workmen ormaterial lifting and for auxiliary services.

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Shaft tower - Top housed winch

Pulley

1,500 kW electricsynchronous motor

Magnetic rope mark detector

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Road header and provisional steel support structures (ribs)

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Hydraulic roof supports

Conveyor belt

Shearer

Waste - Surface

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Conveyor belt

Pillar

Continuous miner

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Ore Processing Plant

The mineral, metal or ore is often found in very low concentrationor otherwise in a condition not suitable for transportation.

Processing plants at the mine site generally include several stages:

Ore size reduction/crushing (mechanical milling to powder)

Mineral refining and concentration (gravity, chemical, electro winning

or smelting processes)

Mineral suitable for transportation and sale

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Ore Processing PlantCrushing & Grinding

Concentration

Storage & Transportation

Refining

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Copper mine process facilities

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SAG (Semi Autogenous Grinding) Mill – 10m diameter, 10,000 kW

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Natural Hazards (earthquake, storm, inundation)

Landslide, subsidence, collapse of tailing dams

Flooding of mines, surface and underground mines

Fire, especially underground fire

Explosion of gases, coal dust or explosives

Collapse of mines, pit walls/slopes or galleries

Damage to power supply equipment (transformers)

Mechanical/electrical breakdown of heavy mining or process equipment

Lifting and transportation operations

Accidental pollution

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Exposure to severe losses in mining industry is also increased by

hazardous and rough working environment!

“We have often very narrow working space where transportation

and movement of material and machinery take place – between

cables, pipes, ropes, moving conveyor belts and lots of obstructing

parts and material lying around - whilst the view is bad due to

dusty blowing air, insufficient or glaring spots of light and the

hearing is bad due to dazzling noise. The humidity may be high the

floor and equipment slippery and the heat difficult to bear.”

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Anyway, where works spaces are not so narrow it does not meanthat mining operations are risk-free!

Flooded open pit coal mine (rainfalls) – Queensland, Australia

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Apart from external hazards, the essence of a good practice

underwriting underpins on:

Understanding and implementation of official rules, loss prevention, risk management and contingency plans measures;

Careful risk analysis and major perils assessment;

Appropriate terms and conditions!

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Understanding of official regulations, loss prevention and risk

management documents is a cornerstone of underwriting.

Because of the wide number of mining processes and specific

requirements in each country and for each type of mine, full and

satisfactory information has to be gathered and adequately

analysed.

Key loss prevention measures are described in the paper.

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Careful risk analysis and perils assessment derive from a widerange of knowledge in underwriting and technical mattersincluding a number of different fields:

Civil engineering including geotechnical aspects;Mechanical engineering;Chemical engineering;NatCat exposure analysis;Etc.

A good study of risk information by experienced underwriters isthe most of good underwriting and risk management!

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Devising adequate T&C (being the result of proper risk assessmentprocess) underwriters can do a lot to adjust policy conditions andmitigate exposure both in terms of frequency and severity.

Standard and Tailor-made wordings;Stop Loss and Sub-limits ;Sound deductibles;Etc.

Good underwriting CANNOT be based on restrictive termsand conditions only!

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Material Damages may be quite expensive for large, heavy and

specialised machineries.

Underground equipment can easily suffer total losses in case of

collapse, flood or underground fire generally excluded!!!

More severe is even the potential of large Business Interruptionlosses which also depend on commodities price volatility!

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As mine fields/plants are generally a continuously expanding

project where the operational phase is mixed up with the

construction of new facilities, different covers in force at thesame time for the same risk have to clearly define what is

covered under which policy!

The section “Insurance Aspects” in the paper provides some

assistance in this regard.

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PML for Mining Industry Risks

High exposure to a variety of critical hazards and the variableAnd complex layout of mining plants makes it impossible todefine a unique PML assessment approach.

The actual PML exposure is the result of a proper risk analysisfor each individual account.

The section “PML Considerations” in the paper provides an Analysis

Process and a PML Scenario Template with major effects from

several hazards.

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We trust that this introduction to our Mining Industry paper and the paper itself would

be helpful to you and your Colleagues when dealing with MINING RISKS.

Thank you for your kind attention!

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