BTJ 5/2011 - Baltic Press

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Focuscontract legislation, must be examinedfrom the point of view of their practicabilityfor the operation of railways. It isnormal practice for a locomotive to besubleased, thus, contractually excludingthe insurer’s recourse options. Withoutthe proper formulation in a specificinsurance contract, the insurer couldrefuse a settlement.• Does the insurance cover include protectionagainst terrorist threats?Coverage for liability risksIn terms of insurance requirements imposedon railway undertakings the approachIt is easy to understand how varying requirements with respect to liability insurancecover result in variations between the costs of cover in the different countries.Example of mandatory liability (see Table 1) – a snapshotCurrency exchange rate fluctuations also cause the amounts of risk cover required in differentcountries to vary and fluctuate. The CHF/EUR exchange rate is a good example:As per 1 August 2009EUR 1 = CHF 1.53, so a sum insured of CHF 100 mln ≈ EUR 65 mln.As per 1 August 2011EUR 1 = CHF 1.13, so a sum insured of CHF 100 mln ≈ EUR 88.5 mln.If a policy is fronted out of the eurozone it means that the minimum amount of cover requiredhas increased by more than 35%.Tab. 1. Limits of mandatory liability insurance, some examples from continental EuropePhoto: DB Schenkeracross Europe reveals major inconsistencies.The position varies widely from country tocountry. The differences in the legal requirementsin the various countries, e.g. in respectof limits to be insured or the prerequisiteswhere an insurance company has to be based,constitute a problem regarding the competitionfor the best insurance premiums. This isnot the best way to achieve fair competitionacross the European Railway market.Art. 9 of EU Directive 95/18/EC does notimpose any standardised obligatory requirementsas to insurance cover either. “A railwayundertaking shall be adequately insuredor make equivalent arrangements for cover,in accordance with national and internationallaw, of its liabilities in the event of accidents,in particular with respect to passengers,luggage, freight, mail and third parties.For freight services, this may only be permittedwhere the charges reflect a willingnessto pay more than costs imposed and whereregulatory bodies have safeguards in place toensure charges are not excessive.”Each country therefore defines its minimumliability insurance requirements individually.Remarks: *Exchange rates 01.01.2011However, the cost of insurance in the different countries is significantly affected not onlyby the different levels of cover required, but also by the competitiveness of the various countries’insurance markets. As state-owned railways in the past were generally not insured,local insurers are often not particularly well-versed on the subject. In addition, insurersclassify railway risks as very high ones, which means that very few insurers are prepared tooffer the high levels of cover required. As a consequence, frequently in many countries onlyone or two insurers are available to provide it. It is hardly necessary to explain how the lawsof the marketplace operate in such a case. There are only a few countries in Europe wherethere is true competition for the insurance premiums to be earned from railway companies,because there is an insufficient number of providers, e.g. as in Germany, competing for suchrisks. In addition, cross-border competition with regard to premiums and insurance termsmay be prevented or seriously obstructed by restrictions imposed by national rules, e.g. if aninsurer based in the same country as the insured has to front a liability policy.A quite recent example of one of the hurdles to be overcome in the design of cross-border liabilityinsurance schemes is represented by the Italian PIR regulations (Prospetto Informativo dellaRete = Terms and Conditions for Railway Network Use), which were obviously toughened afterthe accident in Viareggio. Whether the insurer of the rail operator involved in an accident in thefinal analysis acts as guarantor “bank” for RFI (the Italian network operator), regardless of whetherthe rail operator was in any way responsible for the accident or not, is under discussion.However, there are also positive examples. It is known that in Scandinavian countriesthe regulatory authorities accept insurance models that do not conform to legalrequirements if the insurance product concerned is designed in a sufficiently intelligentway so as to ensure that the entire amount of cover prescribed by law is in effect stillavailable. This means that a railway operator’s insurance costs may be halved.What levels of liability insurance cover do Europe’s railway companies’ actuallyhave in practice? The relevant statutory minimum amount of cover must always be inplace (see for example Table 1).44 | Baltic Transport Journal | 5/2011
FocusThe following examples, however, illustratehow companies’ attitudes towards insurancevary from country to country.Tab. 2. Comparison of limits insured in differentcountries, examples.CountriesLimit insured/in EUR mlnLimit insured/in EUR mlnBenelux 10.00 > 100.00Germany 10.20 > 100.00Poland 00.25 > 125.00Slovakia 00.25 > 150.00Lithuania 00.25 > 112.5Vehicle Keeper Liability InsuranceAs far as is known, there is only one liabilityinsurance product with Europe-widevalidity for keepers of rolling stock, i.e. theDVA Vehicle Keeper Liability Insurance®,which provides cover of EUR 25 mln. Thisproduct was developed years ago and onlycovers the risk of statutory liability arisingout of the operation of rolling stock pursuantto the liability required by law in the countryconcerned. Insofar as mandatory insurancefor keepers exists, as e.g. in Germany, the legallyrequired amount of cover is stipulatedin the policy. However, the risks of a railwayoperator cannot be insured by this method.Accident in Białystok, 8 Nov. 2010This accident serves as an example to illustratein more detail what types of insurancepolicy may be involved. First of all there is theliability of the railway operators concernedto PKP Cargo and Orlen KolTrans, and theinsurance cover for the railway companies’own rolling stock is also involved. In the caseof a railway accident, the question of the infrastructureoperator’s responsibility alwaysarises as well, which means that the latter’sliability insurance is important too. If the infrastructureoperator is in the end found to beresponsible for the accident, the question thenarises as to who will compensate it for its ownlosses. Does it have its own property insuranceor a guarantee from a public authority, or willit simply have to accept the loss resulting fromdamage to the infrastructure?As well as actions by the companies involved,the actions of individuals – e.g. traindrivers – are often the reason why an accidentoccurs. If a third party suffers injury and there isliability, that party’s losses will generally be coveredby corporate liability insurance.If equipment belonging to the railwaycompanies involved is damaged, this may becovered by their own respective property insurancepolicies.Also involved will be the insurance companiesresponsible for the owners of neighbouringproperties, for example their buildingsPhoto: PAPor contents insurers, who make advance payments to cover the damage. In the railway businessbanks and leasing companies are frequently also involved in their capacity as financeproviders. The most important thing for financial institutions is that the equipment financedby them is adequately insured, and in some cases they arrange cover themselves.Once the liability question has been settled, it will be interesting in the specific case to establishwhich insurance companies have in the end paid out how much in compensation, andwhich losses were not insured.Tab. 3. Types of insurance possibly involved, using the accident in Bialystok, Poland, on 8.11.2011 as an exampleInvolved Party Scenario Types of insurance possibly involvedPKP Cargo train Collision with Orlen KolTranstrain close to point switches– Rolling stock insurance– Liability insurance*– Environmental impairment liability insurance– Environmental damage insurance– Insurance for the goods transportedOrlen KolTrans trainCollision with PKP Cargo trainclose to point switchesInfrastructure manager Switching of points andoperating of signals,responsibility for condition ofinfrastructurePeople– Conduct by the train driver(e.g. signal driven through)– Railway station workers– Personal injuryOwners of neighbouringproperty– Material damage– Personal injury– Rolling stock insurance– Liability insurance*– Environmental impairment liability insurance– Environmental damage insurance– Insurance for the goods transported– Liability insurance*– Environmental impairment liability insurance– Property insurance for the track– In the case of misconduct the relevant publicand or employer‘s liability insurance will respond– Buildings insurance with an option to makea recourse claim later from the party thatcaused the damage;– Social insurance (state social security agencies)with the option to make a recourse claim laterfrom the party that caused the damageBank/Leasing Financed, leased rolling stock Property insurance for rolling stockRemarks:* In some countries additional liability without fault, e.g. in Germany.The table does not claim to be complete. For example, construction work could have been carried out at the collisionsite, and in that case the question of liability on the part of the construction firm would also have to be examined, or thepossibility of a technical defect in rolling stock caused by a repair firm.This sample accident shows clearly that double digits can quickly be reached when countingthe number of insurance companies involved in one or the same accident. However, it alsoillustrates how important it is to have made the right management decisions beforehand – i.e.5/2011 | Baltic Transport Journal | 45
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BTJ 5/2011 - Baltic Press

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