General liability insurance in the rail industry market study


We undertook a phase 1 market study of general liability insurance for the rail industry in 2006 as part of the wider review of insurance conducted by ORR's licensing team.

The scope of the study was to make an assessment of whether the market(s) for the provision of rail liability insurance was/were functioning effectively, including the identification of any features or combination of features that may be preventing, restricting or distorting competition.

The two potential concerns that had been identified were:

  • few providers – there was a perception that one insurance company enjoyed (or had enjoyed) a position of dominance. There had been a further suggestion that there was a high concentration of relatively few insurance companies;
  • rising prices - there was some evidence that premiums had risen at a far steeper rate than in the wider UK market for general liability insurance.

The study examined the provision of railway insurance between 1999 and 2006, to see whether there was substance to either or both of these concerns and if so whether they might be caused by structural features in the market. In particular, we were interested to see whether there was a linkage between high concentrations of providers and high premiums and if there was any evidence of barriers to entry in the market and/or evidence of excessive pricing.


Number of providers: we found that the market for rail liability insurance was concentrated but competitive. More concentration occurred in the aftermath of Ladbroke Grove as a result of insurers withdrawing from the market, particularly at a level of cover of up to £10 million where claims activity was at its highest. This situation started to reverse, however, in the period since 2003.

Level of premiums: we found that, while rail premiums rose sharply between 1999 and 2003, this was largely explained by high payouts in the aftermath of Ladbroke Grove. We also found that, since 2003, premiums had fallen and competition had increased.


On the basis of our findings we decided not to carry out further work in this area at that time as there were no identifiable competition concerns but our findings did inform our thinking in relation to the scope of the 2006 review of insurance by ORR's licensing team.