Insurance industry addresses “induced earthquakes”

After all, oil and gas extraction has been taking place for over 150 years. Why now?

The answer lies in Oklahoma, where there’s mounting evidence of a connection between oil and gas operations and an increasing occurrence of earthquakes. Scientists have reason to believe these temblors are being triggered by the injection of wastewater from oil and gas production. Hydrofracturing—or fracking— and waste water injection are viewed as critical to oil and gas production, but public safety officials are saying “not so fast.” A recent 5.8 magnitude earthquake near Pawnee, Oklahoma forced the shutdown of many oil and gas wells and a new fault line has since been discovered in the area.

Since 2008 the rate of magnitude 3.0 earthquakes has grown from roughly two a year to an average of nearly three a day, making Oklahoma the most seismically active of the lower 48 states. The 3 September Pawnee quake was felt in surrounding states including Nebraska, Iowa and Missouri. For Swiss Re and our clients, the challenge is twofold: addressing a catastrophe of growing proportions and underwriting to increased liability risk.

A USD1 billion quake in the region used to be a near impossibility, but new models indicate if current earthquake rates continue, one is likely every 75 years. If the correlation between wastewater injection and a rise in earthquakes is more than an anomaly, society needs to be prepared. In a new report, The link between hydrofracking, wastewater injection and earthquakes: key issues for re/insurers, we examine the consequences of underinsurance, liability and accumulation risk:

•    Lack of earthquake insurance combined with greater frequency and severity puts individuals and businesses at greater risk.  This change in hazard represents another opportunity to help the consumer.There’s currently no definitive way to distinguish between a naturally occurring earthquake and one induced by human actions, so assigning liability is a challenge.

•    Businesses need to consider every aspect of their operations and revenue streams that can be impacted by a big quake such as the one that occurred on 3 September 2016.

We are addressing this growing risk with our clients—insurance companies of all sizes and specialties—as this is another opportunity to be “smarter together.”

Managing climate and natural disaster...

Re/insurance plays an important role in managing climate and natural disaster risk, and that's why it's part of Swiss Re's core business.

Read the whole story

How to rethink flood risk and...

Flash and river floods– increasingly taking many lives and putting economies under severe stress. We can help ensure the best possible outcome for your clients.

Read the whole story