To frack or not to frack. It’s one of the most heated debates impacting energy markets around the world today. Fracking is such a contentious issue that it could dissuade insurers from providing coverage – but so far, this is not the case.
The Australian arm of global insurance brokerage Gallagher recently published a blog entitled ‘Information key to covering fracking risks,’ in which Ryan Mansom, national practice leader – energy at Gallagher, said insurers should regard fracking exposures just like other energy-related activities.
“What we need to be aware of is there are more questions raised around fracking,” he said. “The cover for fracking is generally the same that we put forward for conventional drilling, though there are some additional endorsements which we look to incorporate, insurers often just seek some additional information about the process and the contractors involved, and the cost will be greater.”
Two key things for brokers to consider when arranging insurance for fracking are: cover for well control incidents and third-party liability, according to Mansom. These are complex areas which are often very much intertwined.
“Gallagher has a bespoke wording that we use for both well control and third-party liability which gives extremely broad environmental pollution cover both third party and first party basis,” Mansom added. “We’re able to explain to clients that from a policy point of view you have extremely broad cover, we have got it tidied away so you can get on and do your work.”
A big concern when it comes to fracking is the potential environmental damage it could cause. Mansom said a “strong insurance structure” can protect fracking firms if they come up against worst-case scenarios.
“The greatest concern brought up by protesters is around pollution of acquifers,” he commented. “The third-party liability policy provides cover for any sudden loss incurred, and the [Gallagher] bespoke policy wording actually extends beyond the standard cover to provide an element of first party cover towards this issue. There do remain some exclusions, such as use of BTEX, though the use of such is not an issue in Australian operations.”
