The insurer now has a product to cover train accidents for up to $1 billion to help meet the growing demand.
Yet another train carrying oil has now derailed in Canada, this time near Wadena, Saskatchewan, last week, when it also caught fire, causing an ever rising number of questions to appear with regards to the types of rail insurance that will be necessary to protect companies and railways.
In response to this need for coverage, AIG is now offering a $1 billion liability product for railways.
With the rapidly increasing amount of oil that is being shipped by train, AIG Inc., a commercial insurer, has now introduced a $1 billion rail insurance policy that will protect companies against liabilities connected with catastrophic accidents. This product has been created after a railroad has just finished facing costs of over $1.5 billion from accidents such as derailment, said the casualty operations head at AIG, Russ Johnston.
This rail insurance policy is now among the largest being offered to Class 1 rail carriers in the U.S. and Canada.
Johnston also explained that there continues to be demand within this market for larger insurance policy offerings. Railway companies, are nearly always required to purchase coverage for between $25 million and $50 million, from several different insurers, in order to be able to come to an amount that is somewhere near $1 billion.
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At the same time, it is becoming increasingly commonplace for North American oil to be shipped by rail. This is because the oil production is consistently outpacing the capacity of the pipelines. Rail has become the transportation of choice for the excess. Canada is no exception to this rule. CP railways recently stated that it is expecting to haul up to 200,000 oil filled tank cars next year. It is already establishing the necessary infrastructure for handling the additional shipments of crude.
It was estimated by the Association of American Railroads that last year, North American railways carried 407,761 oil tank cars. This need for large rail insurance policies is only being underscored by the headline making disasters in which trains are being derailed, and their oil cars are burning.