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.
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Because there are many unknowns and conflicting information surrounding fracking (hydraulic fracturing), there is a general reluctance to provide a comprehensive insurance product for these risks.
Until operating, regulatory and legal liability risks become clearer, and best practices are understood, insurers are unlikely to provide coverage for all the risks associated with shale gas development