Dr Paul Rollason, ATHRA Insurance Manager

Insurance

Public liability insurance

The ever-increasing premiums for public liability insurance (PLI) is a problem every organisation around the world is facing and the tourist and heritage rail sector is no different.

In 2002 when we saw the collapse of HIH, premiums in Australia jumped 900% overnight which saw many tourist and heritage (T&H) rail organisations cease operations.  ATHRA, the Association of Tourist and Heritage Rail Australia Inc, was then formed to help members across several issues they faced, of which PLI was one of the largest problems.  ATHRA then set out to find some solutions and we managed to partially resolve the PLI issue in 2006, but more work was required as premiums continued to rise drastically from 2017.

In 2018, ATHRA appointed me to look into possible solutions to this global problem.  The issues were less insurers wanted to underwrite rail as they believed the risk was too high and premiums were becoming unaffordable and unsustainable (some premiums were 50% of the revenue of some rail organisations).

When we approached a number of underwriters, it was very clear we did not have any data to help substantiate our members’ insurance requirements.  The only way forward was to collect some data and “Go Shopping” with a larger premium pool (not individual T&H rail organisations trying to do it on their own).  This was met with a lot of resistance and scepticism from our members. However, with a lot of careful education, members soon realized that with no data we had no case to put to underwriters and additionally it was much easier to go shopping with a premium pool of A$400K with 40 policies rather than 40 individuals shopping on their own.

 

Broker selected

ATHRA approached several brokers and Marsh was selected as being the most suitable.  As a side note, getting quotes from several brokers is a mistake because each broker approaches the same small pool of underwriters.

After an arduous task of collecting data over a 12 month period, we then analysed the data and categorized the rail organisations according to risk (same system we developed with our Rail Safety Regulator) and we established 4 main categories being Main Line, Branch Line, Isolated Line and Static Museum with 3 subcategories of, turnover, passenger numbers and length of line.

We then approached nine (9) reputable underwriters of which 4 were not interested and 5 quoted (including 3 Lloyds syndicates) and of these 2 were far too expensive (aka not interested) and 1 withdrew.  Of the remaining 2, one was still way too expensive and the policy wording was average.  Ultimately the insurer chosen had the best policy wording and terms, had the cheapest premium, had a very reputable re-insurer and this insurer was ultimately impressed with the way we categorized the risk and hence the lower premiums.

Savings

The results in the first year saw sixty-two (62) groups across Australia save a staggering A$323,226.13 which was an average of $5,213/group.  Additionally, the average renewal increase was only 6.8% where the industry average is 15-25+%.

Currently in Australia, 69 ATHRA members have taken PLI cover (that is all operating T&H rail organisations) and are enjoying the benefits.  Coverage includes:-

  • 69 x A$20-30 million base policies
  • 4 x A$50 million policies (A$20 million top up)
  • 2 x A$200 million policies (A$170 million up)
  • 1 x A$250 million policy (A$200 million up)

This represents a A$36 million combined turnover of the T&H members and A$417 thousand GWD (Gross Written Premium) with a Premium Average of 1.16% of turnover which is vastly different from a decade ago.

In the 3 years that ATHRA has had this insurance scheme with Marsh, ATHRA members have saved approximately A$1.966 million to date.

 

Other insurances

ATHRA has also managed to negotiate other insurances and bundle them to get a further reduction in premiums and these include:

  • Personal Accident / Volunteer Worker’s Insurance
  • Management/Association Liability Insurance (formerly known as Director’s Insurance)
  • Rollingstock Insurance
  • Cyber Insurance

 

So where to from here globally???

WATTRAIN and its member organisations need to:

  • Work together collectively,
  • Collect insurance data requirements (currently an enormous lack of data and in fact no useable data),
  • Select ONE broker,
  • Go shopping on the Open Market

Globally it is estimated there are 1650+ T&H Rail organisations which includes 1221 in Australian, New Zealand, USA, UK and Europe.

Combining our efforts via WATTRAIN would see us have a very large premium pool which is potentially extremely attractive to an insurer on the open market.

If WATTRAIN members could collectively work together, and based on the savings ATHRA members saved in the first year, we could save our members a jaw dropping A$7.7 million / US$4.77 million / €4.62 million in the first year alone.  Multiply this over a number of years with the compounding bonus of a smaller annual renewal premium increase then these figures are nothing to be sneezed at.

If we are to be financially viable in the future and be able to reinvest our saved money back into making our railways safer, being able to provide a better product to our customers and being able to restore more of our heritage rollingstock then WE MUST work together to solve this issue.

If you think you don’t have an insurance issue, then think again because it is there and it is only going to get worse.  Denial will only lead to more heartache in the very near future.