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R A I L T R A C K
Presentation toLiability Underwriters
GroupConference 4 September
2002
Ian Thompson
Head of Insurance & Risk Management
Railtrack PLC (In Railway Administration)
R A I L T R A C K
Summary• Overview of industry
structure/Railtrack• Risk Management processes• Key risk statistics• Why has there been incidents?• Industry insurance arrangements• Claims Management• Conclusion• Discussion / Q&A
R A I L T R A C K
Rail Regulator
SRA
Freight operators
Passenger trainoperatingco.s (TOCs)
Open accessoperatorse.g. Eurostar
Britain’s New Railway Industry
RAILTRACKowns the railwayinfrastructure
Other serviceproviderse.g. telecoms
Infrastructuremaintenancecompanies(IMCs)
Trackrenewalcompanies(TRCs)
Rolling stock companiesROSCOs
Heavymaintenancesuppliers
R A I L T R A C K
The heart of the railway
RAILTRACK
R A I L T R A C K
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
R A I L T R A C K
Railtrack’s Objectives
• Maintain/improve safety • Improve network operation/reliability • Maintenance & renewal of infrastructure• Plan & execute major capital
programmes• Heavily regulated• Currently in administration
R A I L T R A C K
Risk Management Process
• Corporate Governance • Safety risk Management• Insurance modelling
R A I L T R A C K
Goals/Objectives/Standards
Response to crisis
Monitor & Control
Evaluate & improve plan
Assess & identify risks
Risk Review Group
Corporate Governance (Continuous Process)
R A I L T R A C K
Railtrack Has
• Commitment from board level• Risk policy statement• A senior level risk review group• Framework for risk assessment• Top down risks culture initiative
R A I L T R A C K
Key Risks
• Regulatory/political• Reputation/finance• Multi-fatality accident• Failure of suppliers• Strategy• Key people• Operational risks
R A I L T R A C K
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
SAFEX ZONE COMMITTEES
ENVIRONMENT
CATASTROPHYRISK
EFFECTIVENESS
PEOPLE SAFETY
DEVELOP CAPABILITY
IMPLEMENT STANDARDS SYSTEM SAFETYSAFETY MEETINGS CONTINUOUS IMPROVEMENTSAFETY TRAINING COMMUNICATIONS
PRODUCTION AREA CO-ORDINATORS MANAGEMENT ALL EMPLOYEES
CONCEPT PRIORITIESSTRATEGY RESOURCESCOORDINATION
AUDITEVALUATEEXPERTISEDESIGNCOMMUNICATIONLEADERSHIP
BOARD
ORGANISATION
FOR SAFETY
Contractor AssuranceContractor Assurance
Contractor
Assurance
LinkUp
Assurance Case
H&S Plan
Monitoring and Audit
Programme of Audit
Database of
information
Key Performance Indicators
Analysis on Contractor Performance
Action by C&S on Contractor
RAILTRACK
R A I L T R A C K
Insurance Modelling
• Modelling of Key insurable exposures• Risk Management Surveys• EMLs - Property £375m
- Business Interruption £200m- Liability £140m
R A I L T R A C K
Key Risk Statistics
• Train Accident Precursor Indicator• SPADs• TPWS risk reduction and rollout• Track Quality• Broken Rails• Maintenance and Renewal Spend• Train Delays
Train Accident Precursor indicator.
Accident Precursors
0
100
200
300
400
500
600
700
800
P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13 P1 P2 P3 P4 P5 P6 P7 P8 P9 P10 P11 P12 P13
2000/2001 2001/2002
Ev
en
ts
6000
6200
6400
6600
6800
7000
7200
7400
7600
Ris
k N
um
be
r
Total PrecursorEvents
13 Period WeightedAverage
Accident Precursor Data 2001/2002Precursor Risk weighting P1 P2 P3 P4 P5 P6 P7 P8 P9 P10Category A SPADs 32.84% 34 48 35 45 46 30 36 29 41 26Level Crossing Misuse 22.84% 142 158 134 142 140 150 120 118 90 61Broken Rails 12.86% 46 28 23 21 16 22 36 49 66 87Irregular Working 8.31% 289 233 250 286 275 245 251 247 277 173Rolling Stock Failures 8.00% 5 2 1 13 4 10 6 4 5 2Environmental Factors 6.07% 6 5 15 13 10 11 5 10 17 2Total 90.92% 522 474 458 520 491 468 454 457 496 351
R A I L T R A C K
Annual Category ‘A’ SPADs
773
724686
633677
590
472434
0
100
200
300
400
500
600
700
800
Num
ber
of SPA
Ds
1994/95 1995/96 1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Financial Year
Annual Category 'A' SPADs
R A I L T R A C K
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 2002All fitments complete and operational by 1 January 2004
R A I L T R A C K
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
R A I L T R A C K
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
R A I L T R A C K
Absolute Track Quality
National ATQ since 31/3/94
2.0
2.5
3.0
3.5
4.0
4.5
5.0
5.5
6.0
13 1 2 3 4 5 6 7 8 9 10 111213 1 2 3 4 5 6 7 8 910 111213 1 2 3 4 5 6 7 8 9 10111213 1 2 3 4 5 6 7 8 9 10 111213 1 2 3 4 5 6 7 8 9 10 111213 1 2 3 4 5 6 7 8 9 10 111213 1 2 3 4 5 6 7 8 9 10 111213 1 2 3 4 5 6 7 8 9 10 1112
94/95 95/96 96/97 97/98 98/99 99/00 00/01 01/02
R A I L T R A C K
Number of Broken Rails on the National Rail Network per Year
709755
952919
706
534
0
100
200
300
400
500
600
700
800
900
1000
Num
ber of R
ail B
reak
s
1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
Year
R A I L T R A C K
Railtrack Spend on Maintenance & Renewals
700
13351581
1775 18601959
2299
2963
3654
0
500
1000
1500
2000
2500
3000
3500
4000
£mill
ion
AverageBR spend
1995/6 1996/7 1997/8 1998/9 1999/00 2000/1 2001/2 2002/3
Year
Average BRSpend
Spend
Budget
R A I L T R A C K
Railtrack Delays by Week 2001/02
Railtrack attributed delay by week 2001/2 - Week 52
0
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
We
ek
1
We
ek
3
We
ek
5
We
ek
7
We
ek
9
We
ek
11
We
ek
13
We
ek
15
We
ek
17
We
ek
19
We
ek
21
We
ek
23
We
ek
25
We
ek
27
We
ek
29
We
ek
31
We
ek
33
We
ek
35
We
ek
37
We
ek
39
We
ek
41
We
ek
43
We
ek
45
We
ek
47
We
ek
49
We
ek
51
Railtrack Direct 4 Weekly RT Average
R A I L T R A C K
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
R A I L T R A C K
Why has there been incidents?
• The incidents• Comments
R A I L T R A C K
Recent Railway Incidents
• Watford 8 August 1996• Southall 19 September
1997• Ladbroke Grove 5 October 1999• Hatfield 17 October 2000• Heck 28 February 2001• Potter’s Bar 10 May 2002
R A I L T R A C K
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
R A I L T R A C K
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
R A I L T R A C K
Current Difficult Areas
• Small Contractors• Employers Liability• Professional Indemnity• Good claims record – a problem of
perception rather than reality
R A I L T R A C K
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
R A I L T R A C K
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
R A I L T R A C K
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
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