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