Magazine article Risk Management

Julia Keaton: CSX Transportation

Magazine article Risk Management

Julia Keaton: CSX Transportation

Article excerpt

It would be difficult to find any risk manager with more passion for the business than Juliana Keaton. Now the director of insurance and business risk management for CSX Transportation, Inc. and president of CSX Insurance Company, Keaton found her calling while serving as an attorney for a law firm that worked with Lloyd's of London. It was there that she became fascinated with the business of risk management and insurance.

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When Keaton joined CSX's legal department in 2011, she was asked to support the insurance group. She soon became director of insurance, while at the same time continuing her original role with the company.

The new responsibility came at a volatile time for the railroad industry. Several years ago, as crude oil became a major source of revenue for freight railroads, the dramatic increase in crude carloads raised the risks for railroads and the communities they serve. Spectacular footage of derailments and oil fires became a seemingly regular occurrence on national news stations.

Meanwhile, pressure from legislative bodies on railroads to increase the amount of insurance purchased continued to escalate throughout the industry. Working to minimize the risks of one of the largest rail transportation companies in the United States in such a challenging environment would be no easy task.

Risk on the Rails

With a history that dates back more than 180 years, CSX is a class 1 freight railroad company headquartered in Jacksonville, Florida. The company has an annual revenue of more than $12 billion and operates in 23 states, as well as Canada and Mexico. Its operations include railroad, highway trucking and transloading and of ten involve transporting highly toxic chemicals such as ammonia and chlorine. The movement of such hazardous commodities carries with it inherent dangers, including the possibility of accidents.

Unlike a cyber breach or even an underground storage tank leak, which can cause millions of dollars in damages while going virtually undetected, an exploding tank car and its devastating effects can cause drastic harm to the community in which it operates, and to the company's reputation. Although the breach of a chlorine tank car in a densely populated area is statistically very remote, many insurance markets are unwilling to write railroad liability insurance. That is where Keaton came in.

On several occasions, Class 1 railroads have sought to join together to purchase a shared high-excess liability policy, also known as "super cat," that would respond to such an event. The policy would have multiple reinstatements were one railroad to use it, and a premium return for a railroad that did not.

In 2014, Keaton, along with risk managers from two other Class 1 railroads, rekindled the dialogue around creation of a shared program. Because previous discussions had been unsuccessful, due in part to the railroads relying on competing brokers, she proposed a dual brokerage concept with both brokers sharing the success of the program. But discussions stalled once again.

Undeterred, Keaton teamed up with Otis Tolbert and Veronica Benzinger at Aon to come up with another solution. Tapping into unused environmental markets, and with the assistance of Ironshore, the group created the Cantilever Excess Pollution Liability policy. Starting with $150 million in capacity, the Cantilever program, which has since been purchased by at least two other Class 1 railroads, is now up to $650 million in capacity and has successfully created pricing pressure on the traditional liability markets.

Cyber insurance was another issue that required Keaton to take a new approach. While the cyber insurance market traditionally has written policies addressing breaches involving the theft or manipulation of personal information, a railroad's primary concern is not necessarily about protecting personal information, but rather, preventing a cyberattack that either interferes with railroad operations or causes a derailment, particularly a derailment of tank cars carrying toxic materials. …

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