Insurers considering providing cover for hydraulic fracturing (fracking) should bear in mind the unique features of fracking which present both risks and opportunities.
South African insurers have the benefit of experience from the United States for the pricing and limiting of risks. Fracking may pose risks which are not present in conventional drilling methods.
More than 50 law suits involving hydraulic fracturing had been filed in the United States since 2009 although none has been tried to judgment.
Many of those cases involve class action law suits. Claimants are land owners who leased oil and gas rights, land owners with only surface rights, and land owners who reside in proximity to hydraulic fracturing operations. There have also been law suits based on increased seismic activity.
Insurers can also look to the London market which has been writing fracking risks.