Zurich exits US railroad liability classes

Zurich North America’s E&S carrier Steadfast Insurance Company has pulled out of casualty segments of the US railroad insurance market, including force liability and railroad liability, The Insurer can reveal.

Zurich will continue to offer railroad protective coverage through its construction line of business, however.

The insurance giant’s US rail casualty unit was headed up by Ron Mathewson. The executive and his team are understood to have been redeployed to other areas of the business.

Market sources said the decision to exit the segment was taken earlier this month after a review.

A Zurich source confirmed the review of the carrier’s railroad business determined that it did not support its core portfolio strategy.

“Additionally, cross-sell opportunities with railroad customers limited the growth abilities within this portfolio,” they added.

The actions do not impact the Zurich Canada railroad portfolio.

The exits in the US railroad liability space are likely to be felt in the market, with only a very small number of domestic carriers writing the business.

According to sources, prior to its retrenchment Zurich’s Steadfast was one of a handful of markets in the US for railroad liability including Axa XL, AIG’s Lexington, Chubb’s Westchester unit and Arch’s E&S casualty operation, with the rest of the capacity coming from Bermuda and London.

The business is seen as largely an excess and surplus lines (E&S) play but is more typically distributed via retailers rather than the wholesale channel.

Although it is written on a primary and excess basis, it is usually seen as more of an excess liability product.

The largest Class 1 railroad insureds typically have high retentions and buy excess liability limits above that up to $1.5bn.

Smaller, regional Class II railroads usually buy smaller limits of $25mn to $100mn, attaching at $500,000 or below, while Class III railroads may have as little as $5mn of coverage attaching at a level in the tens of thousands of dollars, according to an Insurance Information Institute update.

According to its website, Zurich’s offering included a railroad servicing liability product that provided general liability limits of $1mn to $5mn per occurrence, as well as auto liability on a primary and excess basis.

It also provided umbrella liability and excess liability limits of up to $25mn per occurrence.

Its railroad servicing liability products were aimed at railroad service companies and railroad suppliers.

The carrier wrote railroad operations coverage on a primary and excess basis as well.

Railroad protective liability insurance provides coverage to construction projects built alongside or over a railroad for associated liabilities.