New federal insurance law could kill US passenger rail within weeks

A federal insurance requirement set to go into effect soon could derail passenger trains in the United States, writes Kea Wilson in Streetsblog USA. 

According to Wilson, "The commuter railroad industry is bracing for the impending publication of a new federal 'passenger rail liability cap,' which will start a 30-day doomsday clock for every rail operator in America to either secure millions of dollars in additional insurance, or immediately cease operations."

The impending crisis dates back to 1997, when the Amtrak Reform and Accountability Act mandated $200 million in excess liability insurance for railroads. This cap continued to increase despite a lack of increase in train crashes, reaching $294 million in 2015. "Worse, federal law requires Congress to adjust the cap every five years; in 2021, the legislative body raised it to $323 million. The next adjustment is due any day now, and advocates believe the cap will rise to around $400 million — an increase of nearly 24 percent."

This stands in contrast to other modes of travel. For example, the requirement for freight truck companies has been set at $750,000 since 1980 — and hasn't changed. "This is particularly notable given the surging number and associated costs of truck crashes, which often leave victims and survivors destitute, especially when a big rig causes a grisly, multi-car pile-up with damages comparable to train crashes."

Moreover, because the coverage required is so massive, no single U.S. insurance company is able to offer a single, comprehensive policy to train operators, forcing railroads to use foreign insurance markets, sending a significant portion of railroad budgets overseas. 

Jim Mathews, President and CEO of the National Rail Passengers Association, says Congress could fix the problem by requiring the Federal Railroad Administration to use actuarial science to estimate the cost of rail disasters and create tiered minimums to accommodate multiple scales of operators, or authorizing state transportation departments to create their own regional insurer pools.