Executives involved in the formation of a new, Bermuda-based, dedicated vehicle for the specialist needs of the mining industry, have developed a potentially lucrative sideline in writing a political risk product.

Bermuda-based Mining Insurance Ltd. (MIL) has been open for business since the beginning of the year, under managing agent Strategic Risk Management Group (SRM) in London.

Geoff Saunders, SRM chairman and CEO, said a public launch of product lines is anticipated in the coming months.

But he said, "The one that is really taking off is the political risk facility of $250 million. That's the one that is in demand in the mining industry.

"We have a number of extensions from that. We are now developing a D&O product, which we hope will include environmental coverage.

"The other one is marine. We are developing a mining marine facility that addresses particularly the inter-continental transit of bulk mining ore and concentrates. It includes fairly innate things like port blockage and advanced loss of profits on key mining equipment.'' Mr. Saunders would not say how much premium had been written to date, but said that there was satisfaction with the progress.

He said, "We think the real growth curve will occur toward the later part of this year in terms of the political risk business.

"We hadn't really intended to write political risk. The only reason we developed the product was in response to demand. That aspect took us by surprise.'' SRM set out to gather market support to develop the MIL core form. Seven major reinsurers are supporting the scheme and the new wording should be available for writing in about six weeks.

Said Mr. Saunders, "We're not rushing to write business in this soft market on a following form basis. We were setting out to create something unique for the mining industry and we are on track for doing that.

"We have the political risk facility and the mining D&O form up and running.

The property one required us to scope out the engineering for it and while it is on track, it's not being written yet.

"We're only writing business on existing form, but very little of that, quite deliberately.'' MIL is a stand alone, Class Three insurer, and its managing agent, SRM, is being backed by Centre Re. MIL vice president, Margaret Turner, is provided office space by Centre Re, which is also involved in the research and development of new forms.

XL Insurance Co. is one of the supporters of the new core property form. MIL was deliberately capitalised thinly at $250,000, because it is not a risk taker, but an underwriting facility, backed by existing capacity.

Mr. Saunders said, "We saw no point in trying to raise new capital for risk-taking in a particularly soft market. We've left it open in its structure to be capitalised, should the mining industry deem it necessary in the future.'' Already, 40 mining companies in North America, South Africa and Australia are members of the group, and have put forward executives to participate in three working groups that include the wordings development group, the reinsurance liaison group and the engineering group.

There are between 500 and 750 active mining and exploration companies in western countries who are targets for the new products, but the company has also found interest in the former eastern bloc countries.

The company is expecting $37 billion worth of new mining projects in the west by the year 2000 and another $30 billion in China.

A new property and construction form is expected to provide $25 million to $35 million in annual premium.

Said Mr. Saunders, "We hope that it will be available later this year, but we don't anticipate a big landslide because we don't see ourselves setting out to compete with existing premium rates, which are extremely soft.

"But we think it will have attraction in that it is focused coverage, set out to address difficult areas of mining like open pit infrastructure, underground infrastructure, things like water perils and collapsed subsidence of shaft drives and tailings dams, which have always been problematic areas for traditional insurers.

"This provides coverage on a menu basis, so the insured is able to choose those areas he wants covered, albeit at a price. But there will be definition of coverage. We feel that present all-risk forms lack that for mining companies.'' Policyholders, while not being asked to subscribe capital, will in fact, be the owners and will be able to sit on the board. There will also be opportunities for a sharing of mutually beneficial information.

SRM, with offices in Bermuda, London, Johannesburg and future offices in Perth and Denver, provides focused risk management, engineering loss prevention and environmental services to the mining industry.