Subsoil user insurance helps a company protect the property interests connected with performing its obligations for exploration, production and the elimination of the consequences of subsoil use. The terms of such cover are set individually: the insurer assesses the type of work, the features of the site, the contractual obligations, the expected costs and the quality of risk management.

The policy does not cancel the subsoil user's obligations and does not replace financial security where it is required by the contract or by applicable rules. Its purpose is to provide insurance protection within the agreed programme, limits and exclusions.

Contents

What subsoil user insurance protects

The object of insurance protection is usually the policyholder's property interest connected with its obligation to compensate for damage or to bear the costs provided for by the contract if the insured obligations are not performed or are performed improperly. The specific object of insurance and the list of events are set out in the rules and the contract.

Depending on the programme, the beneficiary may be the state, the customer, the owner of the property or another person named in the contract. The wording must be agreed with the terms of the subsoil use contract and the documents that establish the relevant obligations.

Which risks may be included

The cover is determined individually after an underwriting assessment. The contract may include:

  • property claims arising from non-performance or improper performance of the insured obligations;
  • obligations to eliminate the consequences of exploration or production within the agreed scope;
  • the costs of restoration and decommissioning measures, if they are expressly provided for by the programme;
  • liability for harm to third parties, where there is a corresponding section of cover;
  • reasonable costs of establishing the circumstances of the event and protecting the policyholder's interests, if provided for by the contract.

The mere fact that costs have been incurred does not mean that the event is automatically recognized as insured. The insurer checks the causes, the period in which it arose, the fulfilment of the policyholder's duties and whether the claim submitted complies with the terms of the policy.

What is usually not covered

The list of exclusions depends on the insurer. In practice it is important to check the limitations relating to intentional acts, violations known in advance, events before the start of the insurance term, fines and penalties, natural wear and tear, the costs of planned work, inaccurate information and activity outside the declared territory.

Environmental risks, pollution, gradual impact, hazardous production facilities, contractors' work, and war and political risks are agreed separately. If the company relies on such cover, it must be expressly stated in the contract and not assumed from the general name of the product.

Sum insured, limits and deductible

The sum insured is determined taking into account the contract, the licence or another document that establishes the subsoil user's obligations. To choose the limit correctly, it is advisable to assess the maximum possible amount of costs, the cost of decommissioning measures and potential claims from third parties.

The contract may set an aggregate limit for the whole insurance term, a separate limit per event and sub-limits for particular categories of costs. The deductible is the part of the loss that the policyholder pays itself. A limit that is too low may create a gap between the actual obligations and the insurance payment.

What the cost of insurance depends on

There is no single rate for all subsoil users. The cost is affected by:

  • the type of minerals and the stage of the project;
  • the nature, scale and territory of the work;
  • the sum insured, limits and deductible;
  • the term of the contract;
  • the decommissioning plan and the calculation of expected costs;
  • the technical condition of the facilities and the technologies used;
  • the experience of the company and its contractors;
  • the history of incidents, claims and losses;
  • the industrial and environmental safety system;
  • the extensions and exclusions chosen.

To compare offers, insurance companies should be given the same input data. You can then assess not only the premium but also the real scope of protection, the exclusions, the notification deadlines and the document requirements.

Which documents will be needed

For a preliminary calculation the following are usually requested: an application form, information about the company, the contract or licence, a description of the project and the site, the work programme, the decommissioning plan, the cost calculation, data on contractors, information on the risk management system and the loss history.

The insurer has the right to request additional technical, environmental or financial documents. Complete and accurate information allows the risk to be assessed more correctly and reduces the likelihood of disagreements when a claim is settled.

How to choose a programme

  1. Match the terms of the policy to the contract. The insured obligations must correspond to the company's actual duties.
  2. Check the territory and types of work. Include all the sites, facilities and operations that are to be protected.
  3. Assess whether the limit is sufficient. Take into account possible growth in the cost of work and the maximum cost scenario.
  4. Study the exclusions. Pay particular attention to pollution, gradual impact, contractors and known circumstances.
  5. Clarify the notification procedure. The deadlines and form for reporting an event must be clear to the responsible employees.

What to do in case of a possible insured event

You must take reasonable measures to reduce the damage and prevent it from increasing, record the circumstances, keep the documents and notify the insurer without delay in the manner stated in the contract. Without agreement, you should not admit claims or enter into agreements with the claimant if the contract provides for the insurer's involvement.

For settlement the following may be needed: a notice, the insurance contract, contract documents, reports and orders, technical opinions, correspondence, photographs, estimates, a calculation of the loss and confirmation of the costs incurred. The final set of documents is determined by the nature of the event.

Frequently asked questions

Is subsoil user insurance compulsory?

Whether a specific policy is needed is determined by the current requirements, the terms of the contract and licence, and the nature of the activity. Before arranging cover, check the current legal and contractual grounds.

Who receives the insurance payment?

The beneficiary is named in the contract. It may be the Republic of Kazakhstan or another person in whose interests the performance of the obligations is secured.

Can contractors' liability be included?

This is possible only by express agreement. Check who is recognized as an insured person, which contractor work is covered and which limitations apply.

How quickly can a quotation be obtained?

The time depends on how complete the application form is and on the complexity of the risk. Large projects may require technical expertise and additional documents.

Arranging the insurance

To obtain offers for subsoil user insurance, prepare a description of the project, the documents on the obligations and a calculation of the limit required. Polis Re specialists will help to send the data to insurers, compare the terms and draw attention to material limitations.

This material is for information only. The specific risks, exclusions, rate, limits and the decision on payment are determined by the contract and the rules of the chosen insurance company.