The humidity in Kingston, Jamaica, is somewhat constant. For the better part of eight years, diplomats and business representatives have been working inside the International Seabed Authority’s headquarters to reach a consensus on regulations pertaining to deep ocean floor mining. The Caribbean moves apathetically outside. It’s an odd setting for what is quietly turning into one of the extractive industry’s more significant financial standoffs.
However, Kingston is not the site of the standoff. In the boardrooms of Zurich, Hannover, and Vienna, some of the most influential insurers in the world have begun to do something out of the ordinary: abandoning a whole industry before it has even properly started.
In 2023, Hannover Re, one of the top three reinsurers in the world, ceased to underwrite deep-sea mining projects. Swiss Re took a similar course. The Deep Sea Mining Campaign received direct confirmation from Zurich Insurance Group that it is not interested in providing coverage for these operations. Deep-sea mining was positioned next to shale oil and gas, which Vienna Insurance Group has already determined are not worth the exposure. Reinsurers don’t simply take themselves out of the picture when they leave. They remove all other downstream insurers’ financial underpinnings. There is no primary coverage if there is no reinsurance backing. There is no capital if there is no coverage. Additionally, the drills remain on the dock in the absence of capital.
Although environmental optics play a role, there is a perception in the financial community that this goes beyond that. The fundamental problem is uncertainty, which actuaries are truly unable to price. Thousands of meters below the ocean’s surface are three different kinds of mineral formations: polymetallic sulfides, cobalt-rich ferromanganese crusts, and manganese nodules. They include nickel, copper, and cobalt—metals that the energy transition sorely needs.
The issue is that their extraction disrupts ecosystems that are still poorly understood by scientists. clouds of sediment. plumes of wastewater. Whales, dolphins, and entire biological chains are all impacted by noise that travels through the water column. It’s possible that the long-term liability exposure resulting from environmental damage alone would outweigh any reasonable premium revenue that an insurer could charge.
The biggest reinsurers in the world send a message that the rest of the financial industry cannot ignore when they take a backseat, according to Andy Whitmore, Finance Advocacy Officer at the Deep Sea Mining Campaign. The insurance architecture is still lacking, and the industry hasn’t yet mined a single site for profit. It’s difficult not to interpret this as the financial industry reaching a decision that the regulatory community is still disputing.
Twenty-two contractors have been awarded over thirty exploration contracts by the International Seabed Authority. The structure is intricate, layered with conflicting interests and long-standing legal frameworks. Private businesses, state-owned enterprises, and Pacific Island nations sponsor mining corporations in exchange for a portion of future profits. The 1982 United Nations Convention on the Law of the Sea, or UNCLOS, declared the deep seabed to be the “common heritage of mankind.” This phrase was intended to stop wealthy countries from merely claiming their own ocean resources. It’s still unclear if it was successful.
It’s becoming more obvious that the discussion of financial risk has surpassed that of regulations. It’s still unclear if any of the insurers being courted are paying attention, but delegates in Kingston are reportedly talking about the need for “multiple, comprehensive insurance policies to cover all aspects of deep-sea mining.” The industry is in a regulatory gray area that makes coverage calculations even more difficult because the exploitation regulations themselves are unlikely to be finalized in 2025 as originally planned.
The metals are genuine. There is a genuine demand. However, for those whose sole responsibility is to determine whether numbers add up, the numbers aren’t adding up somewhere between the ocean floor and the balance sheet.
