AIG has introduced a new insurance products that is specifically designed for the rail industry
Shipping crude oil via train is becoming more expensive. There are many risks associated with transporting oil in this fashion, one of the most significant of which is derailment. While train derailments are not common, they happen regularly enough to make transporting crude oil over rail a very risky endeavor. The American Insurance Group is looking to mitigate this risk by offering a new product that provides rail companies with $1 billion in coverage.
Insurance industry has relatively few policies for rail companies
The policy being offered by the insurers is one of the largest of its kind that is currently available. The policy also represents the insurer’s foresight regarding the risks that the rail industry is exposed to. Transporting crude oil by rail is not a new practice, but it has been growing increasingly common in recent years. With the rail business booming, new risks are emerging and rail companies need insurance policies that can protect them from the liabilities that they face.
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AIG notes that the expansion of rail companies is exposing them to new risks
American Insurance Group notes that rail companies are exposing themselves to new risks as they begin to expand their businesses. Canadian National Railway and Canadian Pacific Railway, two of the largest rail companies in Canada, have been opening new oil terminals in an effort to expand their networks. These companies have become vital parts of the oil supply chain as they are delivering oil to companies and customers that are not serviced through traditional pipelines.
AIG is one of the first insurers to sidestep the rail industry’s tower of liability
Rail companies protect themselves through “tower of liability” insurance. This involves purchasing policies with $25 million to $50 million in coverage from numerous companies in the insurance industry. Companies often purchase policies until their accrue at least $1 billion in coverage. In Canada, companies are required to prove that they have the necessary level of liability insurance in order to continue operating. American Insurance Group is one of the few in the insurance industry that offers this level of coverage through a single policy.