CII urges insurers to prepare for rise in fracking activity
Written by staff reporter
The insurance profession needs to prepare for the impact that increased levels of onshore fracking could have on UK households and businesses, according to a report from the Chartered Insurance Institute’s Claims Faculty New Generation Group.
The group found that while existing products appear to provide adequate cover for households and small businesses, and no insurer specifically excludes fracking, there are no insurance policies that specifically cover it either.
The report, 'Insurance Implications of Fracking', is the culmination of 18 months of research by a group of 12 industry professionals. The group carried out research with insurers, lawyers, loss adjusters, energy companies and environmental groups to provide an overview of the main issues and key recommendations for the profession.
Hydraulic fracturing has been used in the UK for years, but the scale and the techniques used are changing now that the government has said it will support it at policy level.
Large-scale fracking could be rolled out across the UK in the near future and while there are regulations in place to ensure it is as safe as it can be, insurers must consider the potential risks any increase in activity could bring.
The report identifies and examines a number of key perils associated with fracking such as earthquake, explosion and fire, pollution, injury and death. While cover for these risks are included in most insurance policies, fracking will pose additional complications around liability.
Widespread fracking may also lead to increased claims frequency near fracking sites and then insurers may have to consider how they underwrite this emerging higher-risk group.
Dr Matthew Connell, director of policy and engagement at the CII, said: “Fracking is not something we can ignore. While current products appear to provide some cover, there are no insurance policies that specifically cover it either. The profession needs to needs to think ahead around the issues that more extensive fracking could raise so that we don’t have another ash-cloud scenario where the profession is taken by surprise with an unprecedented event affecting policyholders. It is only by tackling the real risks that people and businesses face that the insurance profession can ensure it is relevant in the future.
“This report is an unbiased and forward-looking document that examines the risks extensive fracking might pose to UK households and businesses. It examines the issues that insurers need to consider should we begin to see a greater level of fracking in the UK and the impact this could have on insurers and policyholders. It is useful reading for everyone working in property insurance today.”
Fracking: Key recommendations for insurers (Source: Chartered Insurance Institute)
Fracking is an emerging risk for the insurance profession and the group outlined three recommendations for insurers to prepare for this:
• The insurance profession needs to remain open and transparent about the risks of fracking by working together to monitor and discuss the issues as one profession
• The insurance profession, energy industry and government need to work closely together to reduce the likelihood of potential risks occurring
• Insurers need to be prepared for claims in the event of a fracking-related loss and consider policy wordings with increased fracking in mind