Facing Unique Rail Risks
Railroads face unique risks within transportation. Property values are high, as is liability for the cargo carried, and regulations require a certain level of coverage. Now: cyber exposure.
“We were worried about people trying to hack into our train control operation systems and concerned about theft of PII. We need someone who can consult with us if there were a breach, handling the PR and reputational impact and protecting our clients’ private information,” said the risk manager of one U.S. freight railway.
Marsh’s Jim Beardsley initiated a continuous analysis of cyber exposure for the company and worked with multiple markets to get the capacity needed. Beardsley regularly helps his clients assess their exposures, seal gaps in coverage or add more where needed.
“He would think through the different loss scenarios we might experience and consider the regulations at play, [such as] what the effects would be with regulators dictating how much coverage we have to carry. What are the implications to our business and to stipulated regulations if one market were to pull out?” said Shireen Bond, director of risk management, Trimac Transportation Service.
Beardsley is also well-versed in the risks of passenger rail.
“Amtrak is very similar to large class 1 freight railroads in terms of size, but of course we have some unique needs because we transport people. Jim is very in tune with those unique characteristics,” said Philip Balderston, director of risk management, Amtrak.
Always Exceeding Expectations
Gallagher’s Michele Centeno went above and beyond when she came to the rescue for one client that needed to rapidly replace a risk manager who left the company.
Centeno and her team stepped in to educate the risk manager’s replacement — a treasurer with no experience in insurance buying — and proactively arranged meetings with underwriters to address the company’s largest exposure: auto liability.
Not only was the client brought up to speed quickly, but Centeno was also able to build a competitive program and conduct a loss portfolio transfer that decreased the company’s insurance spend by hundreds of thousands of dollars.
Centeno provided similar support to Ryder System Inc., a logistics and transportation provider, when the risk management team felt they were not getting enough support from their local brokers in dealing with a complex claim in the UK.
“Michele went in and custom built a team that was better suited to our needs. After that, we were able to resolve the claim very quickly, and my risk managers in the UK were very pleased with the outcome,” said Amy Wagner, vice president of global products, insurance and risk management, Ryder.
Wagner also attested to Centeno’s level of customer service.
“She’s always in touch, even on vacation. She’s almost like your mom — she wants to make sure all of her ‘kids’ are well-taken care of,” she said.
When the traditional insurance marketplace had no product or program for James Douglas to offer his client, he created his own.
Douglas helped to build a single-parent workers’ compensation captive for all of Button Transportation’s entities, including three trucking companies, a leasing company and a WASH facility.
Importantly, setting up the captive required no collateral, which is typically required in risk-sharing structures to secure self-insured losses.
“He escorted us out of the dark. We became a self-insured group,” said Rod Anstead, risk and safety director, Button Transportation. The move helped to cut workers’ comp costs by 60 percent, with the help of a reputable third-party administrator. Douglas also introduced a dashboard camera safety system to the company.
“He’s done a great job of being innovative, staying ahead on our safety risks and finding ways to help us improve our profile,” Anstead said. “He’s the best of the best.”
Eric Triolo, president and owner, Trans Valley Transport, seconded that.
“He always provides us with a competitive package. I can sleep at night knowing that we are 110 percent in the hands of an expert broker. I’ve been doing this for more than 30 years, and he’s someone who has always provided a great partnership and always delivers the competitive pricing that we’re accustomed to,” Triolo said.
“In the transportation business, your broker’s number is on speed dial. We run a 24/7 business, and so does Mr. Douglas.”
A Team Player
To her clients, Lynn Givens is not just a broker but also an extension of their risk management teams, learning the nuts and bolts of their businesses.
“I’ve been transitioning from associate vice president to the VP position. It has been challenging and difficult, but Lynn has answered my every beck and call. I don’t have a strong background in insurance, and she has been very patient and educational,” said Angela Clark, VP of risk management, P.A.M. Transport Inc.
“We just had our renewals in September, and she helped me be a rock star during presentations with underwriters,” she said. ”We were expecting double-digit increases at renewal,” said P.A.M Transport CFO Allen West.
“We expressed that concern, and she put together a consortium of companies and led a series of negotiations. We walked away with pretty much a flat renewal, which translates into hundreds of thousands in savings.”
Givens serves as a liaison with markets, helping her clients to build new relationships with carriers when there’s a need to expand coverage or seek a better deal.
“Trucking is risky and not a lot of carriers want to play ball with us. Getting it done requires relationships, clear communication and creativity,” said the risk manager for one transportation provider who needed additional coverage after suffering some major losses.
“Meeting new markets was a huge undertaking, but it was very well-planned and very efficient.”
Marketplace Knowledge Pays Off
Between its cars, track and terminals, Illinois-based rail company Metra has about $6 billion worth of property to insure.
“We recently replaced about 140 cars for our electric line, which further increased our property value. As a government agency, we also rely heavily on tax dollars. So we had to increase our insurance coverage while keeping costs down,” said John Anderson, deputy general counsel, Metra.
Simon Newport, Aon’s property broking leader, expanded Metra’s coverage by about 25 percent and added a number of policy enhancements with a very low increase in premiums.
CSX Corporation was also facing cost constraints, considering cutting its property program.
Newport helped Juliana Keaton, former director of risk management, engage with the C-suite by isolating five compelling reasons why the program should stay. He worked with Keaton to trim and tailor the program to meet the company’s needs.
“The process forced us to nitpick every detail. The result was a more efficient program.”
With the growing importance of protecting data, Newport worked with carriers to add coverage for non-physical damage to data onto property policies for his clients. Newport’s clients also attest to his ability to leverage his knowledge of the market.
“He has a deep understanding of the Bermuda markets and knows when there’s going to be movement. He knows the politics, who the key players are and who we need to meet with,” Keaton said.
Tenacity and Attention to Detail
Poor loss ratios in the transportation sector have driven some major carriers to pull out of the space altogether, leading remaining players to push up premiums further.
When one of her clients’ carriers intended to non-renew for its entire book of transportation business, Aon’s Annette Nitti stepped in. For Bulkmatic Transport, she was able to convince the insurer to stay in the game and renew coverage, and she convinced them to do it at a flat rate.
Her negotiation savvy was tested when client B-H Transfer Co., a hauler of kaolin clay, decided to expand into frozen foods. Nitti knew the company needed endorsements for food spoilage, a big-bucks charge because the risk of human error is so high.
Nitti expertly presented the scope of controls the company had in place and added the endorsement for a nominal fee.
“She does a great job analyzing the coverage of our various policies to ensure there are no gaps in coverage and is committed to getting us the best value,” said Frank Young Jr., president of B-H Transfer.
For Echo Global Logistics, a non-asset transportation provider, Nitti argued that underwriters should treat them as a tech company rather than a transportation company, given the lack of tangible assets. The pitch resulted in a 10 percent overall premium reduction at renewal.
“Her knowledge of the transportation industry is one I’ve continually been impressed by,” said Pete Rogers, Echo’s VP of finance and financial controller.