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Presentation to Liability Underwriters Group

Presentation to Liability Underwriters Group. Conference 4 September 2002. Ian Thompson Head of Insurance & Risk Management Railtrack PLC (In Railway Administration). Summary. Overview of industry structure/Railtrack Risk Management processes Key risk statistics

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Presentation to Liability Underwriters Group

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  1. Presentation toLiability Underwriters Group Conference 4 September 2002 Ian Thompson Head of Insurance & Risk Management Railtrack PLC (In Railway Administration)

  2. 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

  3. SRA Infrastructure maintenance companies (IMCs) Rail Regulator Rolling stock companies ROSCOs Track renewal companies (TRCs) RAILTRACK owns the railway infrastructure Heavy maintenance suppliers Other service providers e.g. telecoms Britain’s New Railway Industry Passenger train operating co.s (TOCs) Open access operators e.g. Eurostar Freight operators

  4. The heart of the railway

  5. 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

  6. Railtrack’s Objectives • Maintain/improve safety • Improve network operation/reliability • Maintenance & renewal of infrastructure • Plan & execute major capital programmes • Heavily regulated • Currently in administration

  7. Risk Management Process • Corporate Governance • Safety risk Management • Insurance modelling

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

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

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

  11. 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

  12. 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 LEADERSHIP Total Site DEVELOP CAPABILITY IMPLEMENT STANDARDS SYSTEM SAFETY SAFETY MEETINGS CONTINUOUS IMPROVEMENT SAFETY TRAINING COMMUNICATIONS

  13. Contractor Assurance Key Performance Indicators Analysis on Contractor Performance Action by C&S on Contractor Contractor Assurance LinkUp Assurance Case H&S Plan Monitoring and Audit Programme of Audit Database of information RAILTRACK

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

  15. Key Risk Statistics • Train Accident Precursor Indicator • SPADs • TPWS risk reduction and rollout • Track Quality • Broken Rails • Maintenance and Renewal Spend • Train Delays

  16. 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

  17. Annual Category ‘A’ SPADs

  18. 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

  19. 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

  20. 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

  21. Absolute Track Quality

  22. Number of Broken Rails on the National Rail Network per Year

  23. Railtrack Spend on Maintenance & Renewals

  24. Railtrack Delays by Week 2001/02

  25. 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

  26. Why has there been incidents? • The incidents • Comments

  27. 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

  28. 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

  29. 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

  30. Current Difficult Areas • Small Contractors • Employers Liability • Professional Indemnity • Good claims record – a problem of perception rather than reality

  31. 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

  32. 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

  33. 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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