Fracking is still not understood by many, says Brian McCarthy, CEO of Energi.
The industry has a role to play in the development of the booming fracking business, believes Brian McCarthy, CEO of Energi.
“It is the next industrial revolution for the US,” he told the PCI Reporter. “Advancements in fracking are really going to have the next revolution come and be the economic engine and drive the US economy. The train is out of the station – it has left and is heading down the track at 70 miles an hour.”
Certain states have embraced fracking. McCarthy says this is not only in terms of allowing it to happen but also looking at the government’s role in it. McCarthy describes Energi as an “industrial reinsurance company”. He says: “That term hasn’t been used for a while because the last industrial reinsurance companies were really Ace and XL. We have an MGA operation and reinsurance operation to take the risk but no insurance company.” Hannover Re is a 28% shareholder in the firm.
However, fracking is poorly understood by the insurance and reinsurance industry, says McCarthy.
“The other carriers in the marketplace that I would say are where we are at today in terms of expertise and knowledge are Travelers and Berkley. One of the things we found was there is a complete misunderstanding on the potential exposure of fracking,” he says.
“The main misunderstandings we have seen are people really not understanding the fracking concept. It has been around 50 years and it has evolved. There is a misunderstanding of what it really is and the safeguards that have been put in place, and also really the role of government in the US, such as how states like Ohio, Pennsylvania, North Dakota, Oklahoma and Texas have put regulations in place to ensure the environment gets protected.”
He notes that insurers will already be exposed to fracking on some of the risks they have written.
“In this particular case I think it is very critical that reinsurers and insurers really need to understand the risk exposures and understand that like any industry there are going to be bad actors. If you don’t have the proper controls in place those bad actors are going to be allowed to get away with doing things not properly, and then it is going to have an impact,” he says.
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