Help

BI’s Article search uses Boolean search capabilities. If you are not familiar with these principles, here are some quick tips.

To search specifically for more than one word, put the search term in quotation marks. For example, “workers compensation”. This will limit your search to that combination of words.

To search for a combination of terms, use quotations and the & symbol. For example, “hurricane” & “loss”.

Login Register Subscribe

Insurance coverage options for fracking risks are limited

Reprints
Insurance coverage options for fracking risks are limited

Environmental impairment liability insurers aren't eager to write hydraulic fracturing risks, and many energy companies are relying instead on the limited pollution coverage offered under other policies, brokers say.

While a dozen or more large insurers will write EIL coverage for energy companies generally, only five or six will write primary EIL for well owners or contractors with significant fracking operations, said Jeff Hanneman, managing director with the environmental services group of Aon Risk Solutions in Houston.

The number of oil and gas companies buying EIL policies has grown in the past two years, amounting to 30% to 40% of the industry as a whole, Mr. Hanneman estimated, saying that the total is between 60% and 70% among Aon clients.

Insurers are selective about the risks they write, and rates depend partly on geography, he said. Underwriters are concerned about companies with operations in the Marcellus shale, where well sites often are near populated areas; and in Louisiana, with its history of oil- and gas-related environmental litigation, he said.

Houston-based agency Cravens Warren & Co. advises its clients to have EIL coverage, but many decide against spending the money and rely instead on general liability policies, said Mike Schneider, the agency's president.

Insurers writing GL and operators extra expense coverage treat fracking risks more cautiously, said Arlin Beer, senior vice president with broker IMA Inc. in Wichita, Kan. Underwriters are focused on well casing integrity; fracking methods used and the number of frack “stages,” or separate fracturing operations, at a single well; and whether a company has experience with the drilling and other contractors it uses, he said.

Read Next