Presentation to Liability Underwriters Group

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Presentation toLiability Underwriters Group

• Conference 4 September 2002

Ian Thompson Head of Insurance Risk Management
Railtrack PLC (In Railway Administration)
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Summary

• Overview of industry structure/Railtrack
• Risk Management processes
• Key risk statistics
• Why has there been incidents?
• Industry insurance arrangements
• Claims Management
• Conclusion
• Discussion / QA

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Britains New Railway Industry
Passenger train operating co.s (TOCs)
Open access operators e.g. Eurostar
Freight operators
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The heart of the railway
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Railtrack Owns

• 20,000 miles of track, signalling and
  electrification
• 2,500 stations
• 90 depots
• 40,000 bridges, viaducts and tunnels
• 9,000 level crossings

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Railtracks Objectives

• Maintain/improve safety
• Improve network operation/reliability
• Maintenance renewal of infrastructure
• Plan execute major capital programmes
• Heavily regulated
• Currently in administration

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Risk Management Process

• Corporate Governance
• Safety risk Management
• Insurance modelling

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Corporate Governance (Continuous Process)
Goals/Objectives/Standards
Response to crisis
Risk Review Group
Assess identify risks
Monitor Control
Evaluate improve plan
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Railtrack Has

• Commitment from board level
• Risk policy statement
• A senior level risk review group
• Framework for risk assessment
• Top down risks culture initiative

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Key Risks

• Regulatory/political
• Reputation/finance
• Multi-fatality accident
• Failure of suppliers
• Strategy
• Key people
• Operational risks

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Safety Role of Infrastructure Controller

• Railway Safety Case Duty Holder
• Proactive management of risk to the National
  Network (including imported risk)
• Monitoring and review of TOC and FOC Safety Cases
• Management of capacity, safety performance
• Contribution to Railway Group Safety Plan

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ORGANISATION FOR SAFETY
BOARD

SAFEX
ZONE COMMITTEES
CONCEPT PRIORITIES STRATEGY
RESOURCES COORDINATION
ENVIRONMENT
CATASTROPHY RISK
EFFECTIVENESS
PEOPLE SAFETY
PRODUCTION AREA CO-ORDINATORS MANAGEMENT
ALL EMPLOYEES
AUDIT EVALUATE EXPERTISE DESIGN COMMUNICATION LEAD
ERSHIP
Total Site
DEVELOP CAPABILITY
IMPLEMENT STANDARDS SYSTEM SAFETY SAFETY
MEETINGS CONTINUOUS
IMPROVEMENT SAFETY TRAINING
COMMUNICATIONS
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Contractor Assurance
Key Performance Indicators
Analysis on Contractor Performance
Action by CS on Contractor
Contractor Assurance
LinkUp
Assurance Case
HS Plan
Monitoring and Audit
Programme of Audit
Database of information
RAILTRACK
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Insurance Modelling

• Modelling of Key insurable exposures
• Risk Management Surveys
• EMLs - Property 375m
• Business Interruption 200m
• Liability 140m

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Key Risk Statistics

• Train Accident Precursor Indicator
• SPADs
• TPWS risk reduction and rollout
• Track Quality
• Broken Rails
• Maintenance and Renewal Spend
• Train Delays

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Train Accident Precursor indicator.
 
 
Accident Precursor Data 2001/2002
Precursor
Risk weighting
P1
P2
P3
P4
P5
P6
P7
P8
P9
P10
Category A SPADs
34
48
35
45
46
30
36
29
41
26
32.84
 
Level Crossing Misuse
22.84
142
158
134
142
140
150
120
118
90
61
Broken Rails
12.86
46
28
23
21
16
22
36
49
66
87
Irregular Working
8.31
289
233
250
286
275
245
251
247
277
173
Rolling Stock Failures
8.00
5
2
1
13
4
10
6
4
5
2
Environmental Factors
6.07
6
5
15
13
10
11
5
10
17
2
Total
90.92
522
474
458
520
491
468
454
457
496
351
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Annual Category A SPADs
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TPWS Scope

• TPWS is designed to reduce the consequences of a
  signal passed at danger (SPAD) and will be fitted
  at vulnerable locations on the network in
  accordance with the Railway Safety Regulations,
  1999.
• This will involve fitting
• Around 11,000 signals
• Over 700 buffer stops
• Approximately 2,700 permanent speed restrictions
• Signals complete and operational by end of 2002
• All fitments complete and operational by 1
  January 2004

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TPWS Benefits

• TPWS will prevent over 70 of accidents due to
  signals passed at danger.
• TPWS will also reduce the risk of
• Derailment due to train over speeding
• Collision with buffer stops
• TPWS will save an average of 1.6 lives per year

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TPWS Implementation

• 8298 signals commissioned (77 complete)
• 446 buffer stops commissioned (66 complete)
• TOC progress on their fleet installation 65-70
  complete
• TPWS is being successfully delivered to programme

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Absolute Track Quality
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Number of Broken Rails on the National Rail
Network per Year
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Railtrack Spend on Maintenance Renewals
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Railtrack Delays by Week 2001/02
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Summary

• Lowest SPADs on record
• SPAD risk will reduce further with TPWS rollout
• Track quality 50 improvement
• Reduced broken rails
• Increased maintenance renewal spend
• ALL DURING A PERIOD OF SUBSTANTIAL GROWTH IN
  TRAFFIC

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Why has there been incidents?

• The incidents
• Comments

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Recent Railway Incidents

• Watford 8 August 1996
• Southall 19 September 1997
• Ladbroke Grove 5 October 1999
• Hatfield 17 October 2000
• Heck 28 February 2001
• Potters Bar 10 May 2002

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Comments

• A risk free railway is not possible
• Assets/Structure inherited at privatisation/change
  
• Incident frequency has not increased
• Incident costs have increased inter-industry
  costs
• Reputation/litigation risk
• SRA 10 year plan / Network Rail

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Industry Insurance Arrangements

• SRA requires 155m liability cover
• TOCs/Contractors buy through industry facility
• Railtrack buy stand-alone cover
• Is there a better way?
• Long term relationships?
• Management of Contractors

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Current Difficult Areas

• Small Contractors
• Employers Liability
• Professional Indemnity
• Good claims record a problem of perception
  rather than reality

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Railway Claims Management (1)

• Claims Allocation and Handling Agreement (CAHA)
• CAHA objectives - Ensure claimants not
  prejudiced by
• disaggregation
• - minimise industry costs
• CAHA principles - pre-allocated liability for TP
  EL claims below threshold
• - inter-industry claims restricted for property
  damage and consequential loss.
• CAHA process - early appointment of Lead Party
  to manage incident /claims
• - Strategy /authority agreed with
  Potentially Liable Parties
• - Allocation of liability agreed later through
  internal industry dispute mechanism or court

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Railway Claims Management (2)

• CAHA Benefits-
• Pro-active response
• Industry cohesion
• Single point of contact
• Reduce industry claims handling / legal costs
• Dirty linen not washed in public

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Overall Conclusions

• Extensive industry effort to manage risk
• Improving key risk statistics
• Incident frequency no worse
• Consider alternative insurance structures
• Address poor perception of railways
• Pro-active management of claims
• Now is a good time to underwrite rail