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Demystifying Fracking

Fracking is not something to be exploited and profiteered overnight, but rather the next phase of American energy growth. And gaining a clear picture of the risks involved will go a long way in informing insurers' grasp of this often-misunderstood practice.

By Brian McCarthy & Justin Russo | Updated on January 21, 2014
(AP Photo)

Due to the expansion of hydraulic fracturing technologies, the United States is on the verge of surpassing Russia as the world’s leading producer of oil and gas. As hydraulic fracturing—commonly known as fracking—has risen into the national spotlight, its media footprint has expanded exponentially. A quick scan of today’s headlines will show fracking associated with everything from air pollution to earthquakes. But if you judge fracking simply by what the media reports—as most people do—you’ll have a skewed perception of the industry.

This hype storm has scared away many companies, including insurers who perceive fracking will result in a high frequency of future losses. However, given the magnitude of resources and opportunities that fracking unlocks, insurers would be wise to approach fracking and the oil and gas drilling industry judiciously and strategically. By following this model, insurers can tap into this major growth engine.

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