What's Happening?

Facebook Twitter Youtube Linkedin

NEED HELP? QUESTIONS@FIA.ORG.ZA

become A FIA member TODAY
member login

Insuring against climate and technology risks for mining companies and directors

ARTICLE BY

  • Sandra Sithole

SHARE THIS POST

Rising concern about climate change and the risks associated with advancing technology are changing the risk landscape for mining operators and, increasingly, for their directors on a personal level.

To cover any losses related to cyber and climate change disasters, mining companies should be holding sufficient directors & officers (D&O) insurance.

Climate change risks

Directors’ obligation to exercise due skill, care and diligence in the performance of their fiduciary duties is increasingly giving rise to personal liability for climate change-related losses.

Globally, a failure to address climate change has been identified as the top risk in terms of global impact. These issues topped the agenda at the recent Davos gathering.

According to PwC’s annual SA Mine report (September 2019 11th Edition) climate change is not just “hot air”. In addition to the effect of mining operations on the environment, climate changes are forcing mining companies to consider a range of factors that impact on their operations, such as increased frequency of extreme weather events. Flash floods increase operating costs as they entail repairing damage to infrastructure, operational shutdowns and insurance costs. Regulations require companies to spend on controlling and monitoring emissions and pay penalties where these are exceeded. Long-term changes to the local climate impact the availability and predictability of day-to-day inputs required for mining, such as water and transport routes. The socio-economic impacts of climate change are making communities around the mines increasingly vocal and violent.

The significant risk posed by extreme weather events is increasingly concerning for insurers and there is a growing awareness of the interplay between the fiduciary duties of directors and officers of mining companies and corporate disclosures of climate change-related risks under D&O liability insurance policies. D&O insurance covers directors and officers of a company for claims which may arise from decisions and actions (wrongful actions) taken within the scope of their duties as directors and officers.

Although so far no directors have been found personally liable for the effects of climate change, in a growing number of pending global cases shareholders are attempting to hold mining companies and their directors accountable for climate-related risks. The examples so far relate to: losses to corporations as a result of regulatory sanctions for failure to comply with environmental regulatory obligations; misleading shareholders about the physical impacts of climate change; and failing to disclose climate-related risks to investors. Ironically it can be insurance-on-insurance claims. Litigation funding companies have increased the number of claims against directors which are borne by D&O insurers.

There is legal scope for directors to be found personally accountable if their actions fall short of the expected standards in the performance of their duties.

Cyber risks

Another major threat to the local mining industry is cyber risk and it has become increasingly concerning for mining companies in recent years.

While technology and digitisation are an essential and necessary part of business, affecting all aspects of a mining company’s operations from supply chains and handling operations to processing facilities and marketing and sales, they are accompanied by increasing awareness of the vulnerabilities such systems present.

This increased use of advanced technology in mining operations has seen insurance companies placing significant emphasis on risks associated with cyber security. The risk exposure to operations coupled with data privacy threats and fraud means that mining companies need to be more aware of these risks and guard and insure against them.

These are challenging times for the South African mining industry. In addition to the inherent mining risks such as managing health and safety, reducing environmental impacts and managing operations, mining companies need to be acutely aware of the emerging global threats of climate change-related risks and cybersecurity. Mining operations and directors need to ensure that they understand and mitigate against the physical and financial risks of climate change, drawing guidance from their relevant risk committees. There must be a full disclosure of climate change related risks to inform investor decisions and of course directors must comply with their environmental obligations and other statutory obligations and corporate governance requirements.

Critical among all of this is for the mining companies and their directors and executives to ensure that the company has purchased the right insurance to cover the business and the directors and officers for any losses arising from these emerging risks.

Subscriber Terms and Conditions

  1. APPLICATION OF TERMS
    • These terms and conditions (“Subscriber Terms”) apply to the subscription by any qualifying member of the South African Underwriting Managers Association NPC (“SAUMA”) to the services and benefits offered by FIA Services (Pty) Ltd (“FIA Services”) under the SAUMA affiliation arrangement (“Subscription”).

  2. NATURE OF SUBSCRIPTION
    • A Subscription under this arrangement:
      • does not constitute membership of FIA NPC;
      • does not confer any voting rights or governance participation in FIA NPC; and
      • is governed solely by the contractual relationship between the Subscriber and FIA Services.

  1. ELIGIBILITY
    • To qualify for the Subscription, the applicant must, at the time of application, be a current paid-up member of SAUMA.
    • FIA Services will verify the applicant’s SAUMA membership status with SAUMA prior to activation, and may re-verify such status periodically.
    • If a Subscriber ceases to be a paid-up member of SAUMA, the Subscription will correspondingly be terminated.
    • Applicants are required to authorise FIA Services to confirm their SAUMA membership status with SAUMA as part of the application process.

  1. SERVICES
    • The Subscription entitles the Subscriber to the following benefits:
      • Complimentary access to the FIA CPD Platform;
      • Complimentary access to the FIA Insight Magazine (digital edition);
      • Advertising opportunities on FIA platforms at a discounted rate of 15% (fifteen percent) off the prevailing published rates; and
      • Invitations to attend FIA Technical Webinars annually.
    • FIA Services reserves the right to update, vary or substitute the Services from time to time, provided that the overall value and nature of the benefits remain materially the same.

  1. FEES AND PAYMENT
    • The monthly subscription fee is R260.00 (two hundred and sixty rand) for up to seven registered individuals (Key Individuals and Representatives), and R36.00 (thirty-six rand) per additional registered individual thereafter, excluding VAT.
    • The Subscriber shall provide FIA Services with the required details of each individual to be registered under the Subscription for the purposes of activation and billing.
    • All fees are exclusive of VAT, which shall be charged at the prevailing statutory rate.
    • Subscription fees are reviewed annually in March and may be adjusted with effect from 1 April.
    • Any changes to the Subscription, including but not limited to the number of Representatives and Key Individuals registered under the Subscription, may only be effected once annually during the annual review period in March of each year, with such changes taking effect from 1 April.
    • Subscription fees shall be billed monthly in arrears, unless the Subscriber elects an annual billing cycle at the time of application.
    • The Subscriber shall ensure that all billing information (including contact details, authorised signatories and bank account details) is kept accurate and up to date.
    • Non-payment of subscription fees may result in suspension of access to the Services until such fees are brought up to date.
    • The Subscriber acknowledges and agrees that all subscription fees payable under these Subscriber Terms may be collected by way of debit order, which shall be processed by the holding company, FIA NPC (The Financial Intermediary Association of South Africa), on behalf of FIA Services. Payment to FIA NPC shall be deemed to constitute valid and sufficient discharge of the Subscriber’s payment obligations to FIA Services under these Subscriber Terms.

  1. ONBOARDING
    • Onboarding will be conducted as a Subscription with FIA Services under the SAUMA affiliation arrangement.
    • Onboarding will not confer FIA NPC membership status or any associated rights.
    • Onboarding is conditional on confirmation of the Subscriber’s current SAUMA membership at the time of application

  1. DATA PROTECTION
    • FIA Services will process all personal information in accordance with the Protection of Personal Information Act 4 of 2013 (POPIA) as set out in our POPIA policies.
    • By subscribing, the Subscriber authorises FIA Services to confirm their SAUMA membership status with SAUMA and to process personal information for the purposes of fulfilling the Subscription.

  1. TERMINATION
    • The Subscriber may terminate the Subscription by giving FIA Services one calendar month’s written notice.
    • FIA Services may terminate the Subscription on one calendar month’s written notice, or immediately if the Subscriber breaches these Subscriber Terms and fails to remedy such breach within 14 (fourteen) days of receiving written notice.
    • Termination of the SAUMA–FIA Services affiliation agreement shall not automatically terminate these Subscriber Terms.
    • Termination by the Subscriber shall not relieve the Subscriber of liability for any subscription fees accrued up to the effective date of termination.
    • FIA Services may suspend or terminate the Subscription with immediate effect in the event of non-payment of fees by the Subscriber.

  1. GENERAL
    • These Subscriber Terms are governed by the laws of the Republic of South Africa.
    • Any disputes arising under these Subscriber Terms shall be dealt with in accordance with the dispute resolution provisions contained in the FIA NPC membership terms and conditions, as modified to reflect that the contractual relationship is with FIA Services.
    • Any notices required under these Subscriber Terms may be validly delivered by email to the addresses provided in the Subscriber’s application form, and such notices shall be deemed received on the day of transmission if sent during business hours.
    • The Subscriber may not assign, cede or transfer any of its rights or obligations under these Subscriber Terms without the prior written consent of FIA Services.
    • No variation of these Subscriber Terms shall be of any force or effect unless reduced to writing and signed by both FIA Services and the Subscriber.