Developing natural resources in emerging markets can be rewarding, but it requires an in-depth assessment of the associated risks alongside robust supply chain management.
Take damage to infrastructure in the form of strategic blockages for example, such as was the case recently when China banned iron ore producer, Vale‘s mega-carrier vessels capable of carrying 400,000 tonnes of dry bulk cargo, from entering the country’s ports over fears of the impact on supply and prices.
Political decisions such as this can not only affect supply to a mine, but also the ability of a customer to receive the mine’s output.
Willis’ latest Mining Risk Review reminds risk managers to check they are covered for blockages arising from industrial action and political decisions by governments, on top of the more obvious ‘physical’ blockages.
Two valuable extensions to standard insurance cover are therefore; additional cover for any delay to the commencement of business or delay during a mining venture arising from a port blockage and the abolishment of any requirement for the blockage to result from an insured peril.
The Evolving Threat of Piracy
According to the United Nations, Somali pirate attacks are at the lowest level since 2006. That said, piracy remains a significant threat to the global supply chain with piracy in West Africa on the increase. The target in this region shifts from the traditional bulk cargo carriers to the crew members who are held for a ransom but still with the same, disruptive effect on the supply chain.
The kidnap and ransom risks also extend inland and private security measures at mining facilities remain a significant cost to businesses, often in an attempt to make up for a shortfall in law and order in unstable territories.
Given the uncertainty in emerging markets, adequate and appropriate insurance is crucial to managing supply chain risk in the mining sector. These policies include:
- cargo insurance (including war risk)
- political risk insurance
- kidnap & ransom
- piracy cover
Sound professional advice and a trained response consultant are invaluable to targets of piracy, whilst legal and risk advice on the compliance and regulatory aspects of such insurance claims remains vital.