Why rolling stock is insured

Rail accidents happen less often than road accidents, but each one is expensive. Rolling stock is costly, and restoring it takes time — sometimes a railcar cannot realistically be restored after a derailment. That is why most rolling stock operators, leasing companies and shippers with their own fleets insure their railcars and locomotives.

Rolling stock that is owned, rented or leased can be insured. In leasing transactions, insurance is often a condition of the contract. In addition, a damaged railcar standing idle means lost revenue from transport, so prompt compensation helps keep the fleet in circulation.

What can be insured

  • Railcars — gondolas, flatcars, boxcars, hoppers, refrigerated cars.
  • Tank cars — for petroleum products, chemicals and gases.
  • Containers.
  • Locomotives and self-propelled special rolling stock — under separate programmes.
  • Passenger cars.

Main risks

The contract covers damage to or destruction of rolling stock as a result of:

  • a transport incident in motion — a crash, derailment, collision;
  • fire or spontaneous combustion (except electrical short circuit, unless included separately);
  • objects falling onto the insured property;
  • natural disasters and hazardous natural phenomena;
  • unlawful acts of third parties;
  • theft.

Additional cover

By agreement with the insurer, you can insure damage, loss and destruction:

  • during running-in after repair;
  • during training runs;
  • during tests of new designs and trial or demonstration runs that require special permission;
  • while under repair at a depot or plant.

The costs of lifting and transporting damaged rolling stock and clearing the track can also be insured.

Liability

Damage to a railcar is not the only risk. The owner of rolling stock may be liable for harm to third parties, infrastructure and the environment, especially when carrying dangerous goods. The following are used for this:

  • civil liability insurance for the rolling stock owner and operator — see Liability;
  • passenger carrier liability insurance — compulsory under Federal Law No. 67-FZ (OSGOP — compulsory carrier liability insurance);
  • forwarder and carrier liability insurance for the safety of cargo.

The cargo itself is insured separately — railcar hull cover does not include it. See Cargo insurance.

How the cost is determined

The rate is calculated based on a risk analysis. The insurer considers:

  • the type and age of the rolling stock and its value;
  • the number of units in the fleet — large fleets are insured under master contracts at better rates;
  • the nature of the cargo carried, especially dangerous goods;
  • the geography of operations;
  • loss history;
  • the deductible.

Railway risks are generally low-frequency, so with a well-chosen deductible, insuring a fleet costs a reasonable amount.

What to do if a railcar is damaged

  1. Notify the insurer of the incident within the period set by the contract — usually within a few working days.
  2. Do not start repairs before the insurer's representative has inspected the car, unless the contract allows otherwise.
  3. Collect the documents from the carrier and the infrastructure owner: general-form reports, the railcar damage report, internal investigation materials.
  4. Prepare evidence of the repair cost: a defect list, a cost estimate from the depot or repair plant, invoices.

Practical recommendations

  1. Clarify how the contract determines the insured value — book value, market value or replacement cost.
  2. Check whether cover extends to periods of repair and storage.
  3. Agree the claims procedure: who carries out the inspection and when, and which documents are required (general-form reports, damage reports).
  4. Under a master contract, agree how new units are added and retired ones removed.

Polis Re specialists will help you prepare fleet data and obtain offers from several insurers — submit a request. Related products are in the Corporate property insurance section.