AIG expands railroad liability insurance

Insurer American International Group (AIG) is expanding its casualty liability coverage by $1bn per occurrence for US and Canadian railroads at the industry's request.

AIG's new coverage for catastrophe losses would be in excess of $1.5bn in underlying limits and represents "one of the largest capacities offered to the rail industry by a single insurer," the company said.

The move comes after the US Department of Transportation suggested in July that the railroads typically do not carry enough insurance to cover the costs associated with a catastrophic event. The $25-50mn that the railroads typically carry is not enough insurance to cover "the consequences of incidents involving hazardous materials," the department said.

"The Class 1 railroads are seeing strong growth and a resulting increase in risks they need to cover. AIG is one of the few carriers that can provide customers the large limits and risk expertise to meet this need," president of AIG's Casualty Americas group Russ Johnston said.

AIG's expansion of coverage comes amid a boom in North American crude-by-rail traffic.

US Class I railroads moved 407,000 crude carloads in 2013, up by nearly 4,300% from 9,500 in 2008. The rapid expansion of crude-by-rail movements in the US has raised concerns about the safety of shipping hazardous materials by rail, especially after a crude train on its way to a refinery in New Brunswick, Canada, derailed and exploded last year, killing 47 people in Quebec.

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