Category: Energy insurance · Reviewed by Taylor Watts, Broker · New Business · Last reviewed 2026-06-05
Onshore drilling insurance is the part of upstream energy insurance covering land-based drilling rigs and drilling operations, including hull and machinery cover for the rig itself, contractors equipment cover for ancillary plant, and operators’ extra expense cover for well control exposures.
Category: Energy insurance Also known as: onshore drilling rig insurance, land drilling insurance First codified: Lloyd’s wordings from c.1950s; modern AAM family (Association of Average Adjusters Marine) and bespoke onshore wordings Related legislation: Petroleum Act 1998 [1]; Health and Safety at Work etc. Act 1974 [2]; Borehole Sites and Operations Regulations 1995 [3]
Onshore drilling insurance covers the physical assets and operational exposures associated with land-based oil and gas drilling. The principal assets are the drilling rig itself (mast or derrick, draw works, mud pumps, blowout preventer stack, top drive, generator sets), the substructure (often mobilised in modular form between well sites), the ancillary plant (camp facilities, fuel storage, water treatment, waste handling), and the consumables and inventory at the well site [4][5].
Operational exposures include accidental physical damage to the rig and equipment (fire, mechanical breakdown, transit damage between sites), contingent equipment loss (loss of items hired from third parties), well control exposures (blowouts, cratering, formation damage) addressed through OEE, and liability for personal injury and property damage on site or to third parties [4][5].
The market is concentrated in Lloyd’s, the US energy markets and a small number of continental European specialists. Onshore drilling is generally a lower-severity loss profile than offshore drilling — drilling rigs can be repaired or replaced relatively quickly, well control intervention is logistically simpler on land, and pollution exposures are generally more containable. But frequency of small and medium losses is higher than offshore, and the cyclical nature of land drilling (driven by oil price and onshore E&P investment) creates volatile market conditions [4][5].
The Petroleum Act 1998 vests onshore oil and gas resources in the Crown and provides for the Petroleum Exploration and Development Licence (PEDL) regime administered by the North Sea Transition Authority. The PEDL licensee is responsible for all activities under the licence including drilling, and must comply with the conditions of the licence and the requirements of supporting consents [1][6].
The Health and Safety at Work etc. Act 1974 and the Borehole Sites and Operations Regulations 1995 (BSOR) set the principal safety framework for onshore drilling operations. BSOR applies to boreholes drilled for any purpose other than coal mining; it imposes notification requirements, planning requirements and operational duties on the well operator and the drilling contractor [2][3].
For hydraulic fracturing (now subject to a UK government moratorium in England since 2019), additional consents are required under the Infrastructure Act 2015 (sections 43–58 set conditions for shale gas drilling) and the Petroleum Licensing (Exploration and Production) (Landward Areas) Regulations 2014. The regulatory regime for onshore hydraulic fracturing has been the subject of significant political and policy attention over the past decade [7].
Environmental permitting under the Environmental Permitting (England and Wales) Regulations 2016 covers groundwater protection, waste management and air emissions arising from drilling operations. The Environment Agency, the Coal Authority (for coal bed methane) and the relevant Mineral Planning Authority all have regulatory roles [8].
A drilling contractor operating a fleet of onshore rigs places hull and machinery cover for each rig, typically at agreed values of US$15m–US$60m per rig depending on size (truck-mounted workover rigs at the lower end, large land rigs capable of drilling deep wells at the higher end). The wording responds for accidental physical damage, mechanical breakdown and transit damage, with deductibles per occurrence and (for transit) per move [4][5].
The drilling contract between the drilling contractor and the E&P operator (most often based on the IADC Daywork Drilling Contract) allocates risk and insurance responsibility between the parties. The drilling contractor typically retains responsibility for damage to its own rig and equipment, the operator typically retains responsibility for the well, the formation and the produced hydrocarbons, and each indemnifies the other on a knock-for-knock basis for personal injury and property damage to its own personnel and property. The insurance arrangements track this allocation [4][5].
Well control cover (operators’ extra expense, OEE) is normally purchased by the E&P operator rather than the drilling contractor, on the basis that the operator has the contractual responsibility for the well. OEE cover provides for the costs of regaining control of an out-of-control well, redrilling and reworking, and seepage and pollution costs. Limits per well per event for onshore wells are typically US$25m–US$100m, lower than for offshore wells reflecting the lower expected cost of intervention [4][5].
Conventional onshore drilling: vertical or moderately deviated wells drilled with conventional rigs. The default product for most onshore drilling.
Horizontal and extended-reach drilling: more complex operations with higher rig values, longer rig moves and different well control dynamics. Increasingly common in unconventional plays and mature field workover.
Coiled tubing and well services: lighter operations performed with specialised equipment for well intervention, workover and stimulation. Insurance is typically arranged on contractors equipment wordings rather than full drilling rig hull and machinery.
Heavy oil and bitumen drilling: in tar sands and oil sands operations (Alberta, Venezuela), drilling and steam-assisted production techniques generate distinct risk profiles.
Geothermal drilling: increasingly relevant as deep geothermal projects develop. Wordings draw on conventional onshore drilling forms with adaptations for the different exposure profile.
Hydraulic fracturing operations: where permitted by the regulatory regime, generate additional exposures (subsurface induced seismicity, water management, surface containment) requiring specific wording attention.
A UK-based onshore drilling contractor operates a fleet of three workover rigs and one conventional drilling rig in continental European operations. The fleet hull and machinery cover provides US$35m total insured value with US$50,000 per occurrence deductible and US$100,000 transit deductible. Premium for the rig fleet is approximately US$250,000 per year. The contractor’s customers (E&P operators) purchase their own OEE cover separately. During the policy year, an electrical fire on one of the workover rigs causes US$1.4m of damage; the hull cover responds, less the deductible. Figures in this example are illustrative.
This entry is part of the Apex Insurance Wiki. Last reviewed by Matt Bartlett on 2026-06-05. Next review: 2026-12-05.
Apex Insurance Brokers Limited. Authorised and regulated by the Financial Conduct Authority, FRN 724952. Registered in England and Wales, Companies House 07014570. This entry provides general information about UK insurance concepts and is not regulated advice. Consult your insurance broker on your specific position.
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