The insurance industry and unconventional gas development: Gaps and recommendations

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.