The insurance industry and unconventional gas development: Gaps and recommendations

Abstract

The increasingly growing and controversial practice of natural gas development by horizontal drilling and high volume hydraulic fracturing ('fracking') faces a severe environmental insurance deficit at the industry level. Part of this deficit is arguably inherent to the process, whereas another part is caused by current risk information shortfalls on the processes and impacts associated with development. In the short and long terms, there are several conventional and unconventional methods by which industry-level and governmental-level policy can insure against these risks. Whilst academic attention has been afforded to the potential risks associated with unconventional natural gas development, little consideration has been given to the lack of insurance opportunities against these risks or to the additional risks promulgated by the dearth of insurance options. We chronicle the ways in which insurance options are limited due to unconventional gas development, the problems caused by lack of insurance offerings, and we highlight potential policy remedies for addressing these gaps, including a range of government-and industry-specific approaches.Keywords: Insurance; liability; hydraulic fracturing; fracking; risks; market gap Highlights: A gap exists in provision of liability insurance for 'fracking'-related risks  The market gap is due primarily to uncertainties about probabilistic risk 2  Insurance for risks similar to 'fracking' highlight potential policy options  Government regulation and/or industry agreements can effectively fill the gap  Policies on insurance and liability coverage necessitate ethical considerations

Social sustainability assessment of shale gas in the UK

“…The impact on local communities has been evaluated in the literature considering community benefits, such as charters, benefit agreements and compensation schemes to offset damages caused by activities related to development. Most authors argue that there is a need for compensation and insurance schemes against environmental damage caused by shale gas development (Behrer and Mauter, 2017;ter Mors et al, 2012;Wetherell and Evensen, 2016). This is important as damage to the environment can affect the livelihoods of residents, such as ill-health and property value.…”