Rail: A Big New Risk Coming Down the Tracks

rail tanker cars

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.

Why now?

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.

About Daniel Bancroft

Daniel Bancroft is Willis’ railroad expert and Senior Vice President in the company’s Transportation practice. …
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2 Responses to Rail: A Big New Risk Coming Down the Tracks

  1. Good point! Also in Germany sometimes dangerous chemicals make it through the middle of town centers on the railway and neither the local communities nor the operators are aware of the risks let alone to deal with an accident. BASF in Germany started some years ago to track all transports with goods, that could be e.g. “useful” for terrorists. Today the challenge is, that many of the introduces track & trace systems are GSM based and easy to jam or even worse to fake signals: So on in your situation room everything looks good, while the container, wagon, truck, … is already robbed or on its way to an unknown destination. That’s where Supply Chain Security meets IT-Security. Also with growing maritime risks, companies tend to look for redundant routes like the railroad between China and Europa via Kasachstan, Russia and Ukraine. That’s where AKE just started to focus on risk assessments of railroads.

    • Daniel Bancroft says:

      Bitte Sehr!

      The governments’ response, whether in Germany or North America, is usually reactionary. This has been the situation, fall-out, and delayed efforts to find “fixes” as described in our interview on the subject. Where we are with our clients is based on a “360”, if not resilient approach:

      Forward looking

      Risk Assessment
      Operational Review
      Technology (as you elaborate on in your observations)

      Static and Ongoing

      Re-evaluate shipping contracts
      Initiate a risk, security, and operational dialogue with the rail carrier
      Bring together the shipping community through the dissemination of data and information on the transportation of hazardous commodities

      For those affected indirectly, such as passenger rail operators, the movement of passenger and hazmat on shared tracks involves complicated indemnities, requirements for higher limits of insurance, and increased costs. Taking the side of the shipper or passenger operator is important. Eliminating, where possible, conflicts of interest as a risk consultant, advisor and broker is key to the clients’ success.

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