Willis, Endurance Cover Australia Mining Firm in Index-Based Weather Deal

December 3, 2013

Willis Group Holdings announced on Tuesday that it designed and placed a derivative-based risk transfer solution to protect against construction delays on an Australian project from cyclone and heavy rainfall.

Endurance Global Weather is providing the coverage to protect Roy Hill Holdings Pty Ltd, an emerging global mining, rail and port venture, against the threat of weather-related delays in the construction of what will be the largest single-site iron ore mining operation in Australia.

Endurance Global Weather, a global provider of weather risk management solutions, is a subsidiary of Endurance Specialty Holdings Limited.

Under the coverage, Roy Hill is protected from the financial impact of a named cyclone passing through a specified geographic area which encompasses the company’s 55 million tonne per annum mining, rail and port project currently under construction in the Pilbara region of Western Australia.

The unique “cat-in-a-circle” solution, structured and executed by Willis’s Global Weather Risk Practice, provides Roy Hill with event coverage based on the duration that a cyclone spends in the indemnification zone and the amount of cyclone-related rainfall across three Australian Bureau of Meteorology weather stations.

The transaction, which has a total limit of AUD56 million ($38 million), spans two cyclone seasons and responds to these objectively defined cyclone and rainfall events occurring during the period of construction leading up to the mine becoming operational in 2015.

The index-based cover differs from regular indemnity cover in that there is no requirement for the insured to prove any loss or damage to assets from the cyclone. The indemnity is based purely upon the performance of the pre-agreed cyclone and rainfall indices.

In a statement about the coverage, Steve Hearn, Deputy Chief Executive Officer of Willis Group, said: “Traditional construction and property policies will cover the damage caused by a cyclone, but not the financial impact of project delays and additional wages where there is no damage to the insured assets. This bespoke solution was designed to cover this traditionally uninsurable risk, which Roy Hill identified as a particular concern.

The Roy Hill project is a major new integrated infrastructure and iron ore mining project located in the Pilbara region of Western Australia. Currently in the early stages of construction, the $10 billion project is expected to export its first ore in late 2015. The mine will produce 55 million tonnes of iron ore for shipping per annum. The project includes the construction of a major mining operation, mine processing infrastructure, a 344km heavy-haul railway, train unloading and ore handling facilities, and two new purpose-built berths at Port Hedland’s inner harbor.

Source: Willis Group Holdings