Hydraulic Fracking

The term “hydraulic fracking” is used to describe a drilling method. Quantities of water, chemicals and sand are injected into gas-producing shale rock beds.

The natural gas is trapped inside the shale rock. Pressure produced by this technique creates small cracks in the surrounding rock. Thus the natural occurring gas is released and captured. After the capture, waste water is released.

Environmental concerns

Hydraulic fracking has gained positive and negative attention over the past few years. This drilling method is highly contentious.  This is due mainly to environmental concerns. Methane gas is released.  It is dangerous because poses possible air and water pollution risks.

The amount of water used places strain on water supplies, especially in drought-stricken areas. Potential hazards include induced earthquakes as well as operational failures and traffic congestion.

Drilling operators should have the proper insurance coverage. Most drilling companies carry commercial general liability. This is protection against third-party bodily injury as well as property damage claims. Also carried by operators is extra expense liability coverage. This insures against well failures and closures.

Homeowners

Homeowners exposed to risks from fracking should be aware of coverage limitations. There are also exclusions in their homeowners insurance policy. Such policies exclude settling, cracking and shrinking. Pollution exclusions are also common in homeowners policies. These policies do not cover damage incurred by seismic activity. As a result,  individuals exposed to this risk should purchase earthquake specific cover.

Complicating matters, regulations over hydraulic fracking operators differ widely among the states.

Some U.S. Insurers have started excluding fracking activities from their policies because of pricing difficulties.

The rapid expansion of hydraulic fracking operations in the U. S. brings the need for insurance solutions.

Major global reinsurers, which traditionally pick up substantial parts of insurance exposure, remain unwilling to take on hydraulic fracking. The insurers and reinsurers are reluctant to participate if they can’t understand the risk. If they can’t understand the risk, they can’t price it. If an insurer can’t measure and quantify that, the choice would be to stay out of the business altogether.