Recent high-profile accidents, including the ghost train disaster in Lac-Mégantic, Quebec, and the less deadly but equally explosive derailment in North Dakota earlier this year, are raising safety and liability concerns for railroads and shippers.
The root of the problem is the growing number of rail cars carrying crude oil—much of it being generated by the shale oil boom in North Dakota and the oil sands fields in Alberta, Canada. With no pipelines ready to carry the oil, some 500,000 tanker cars are now in service on freight and sometimes passenger tracks.
Multiple Risks in Play
The shipping community and its insurers are dealing with several issues:
- Different types of crude come with different risks: the Bakken, from North Dakota, is especially flammable
- Terrorism risk, especially where train lines travel through population centers
- Liability spreading through the shipping chain
- Environmental pollution
Insurers are especially concerned with their clash exposure—the possibility of a single incident impacting several clients at once—and the stacking of limits.
Many rail companies are going early to market, engaging with carriers closely, giving themselves more time to sort out these emerging issues. That’s a prudent idea. They’ll need it.
For more detail on this new and expanding rail risks, see the video of my recent interview with WillisTV anchor, Colleen McCarthy.