By Andrew Towers, Assistant Vice President, Asia-Pacific Risk Management Group, Allied World

Australia’s rail network is undergoing a significant expansion in both the freight and passenger space, which will continue – and even accelerate -in the years ahead. However, integrating new lines with existing infrastructure could create challenges in both the construction and operational phases.

From the rapid expansion of freight and passenger lines in the 19th century to the evolution of this century’s high-speed services, railways have long played a significant role in developing national economies.

The new infrastructure projects driving the expansion of Australia’s rail network are therefore expected to give a substantial boost to the country’s finances, as well as improve regional economic prospects.

For companies engaged in the construction, adaptation and operation of this growing network, this evolution will present some risk management challenges that hark back to the infancy of rail.

An October 2020 report, produced for the Australasian Railway Association (ARA), estimated that $155 billion of rail investment is planned over the next 15 years, with Australia keen to transform its fragmented national network.

The rail industry is believed to carry around 56 per cent of freight in the region, and around 75 per cent of the increased demand for freight services in the next decade is expected to be met by the rail network. This is driving the development of Australia’s $12 billion Inland Rail project, which will connect large tracts of Queensland, New South Wales and Victoria.

In opening up Australia’s interior, Inland Rail will not only create new jobs during the construction period, but will also bring further business and employment opportunities following completion to areas whose economic growth has been overlooked for many years.

In the passenger rail sector there is also a wealth of high profile projects underway, from Sydney Metro to the Cross River Rail project in Brisbane, Queensland, the Metro Tunnel and Suburban Rail Loop in Melbourne, and Western Australia’s METRONET project in Perth – all of which are supported by Allied World as a risk management partner, providing contract works and delay in start-up insurance.

Karsten Buescher, Vice President, Lead Underwriter, Australia Construction & Engineering Division

ARA estimates that construction work on major rail projects across Australia over the next five years will more than double the annual activity seen at the peak of its mining boom, at a cost of over $14 billion. However, as the sector expands, risk managers in the rail sector will need to be mindful of both new and emerging risks from upgraded technology and the evolution of existing challenges with rail rolling stock and infrastructure.

Climate change

Climate change has the potential to exacerbate a range of inherent hazards, from more frequent flooding or erosion of the track-bed following catastrophic rainfall, to track-bed subsidence or collapse of embankments created by extended droughts, to the increased risk of cracked or buckled rails and signalling problems caused by rising summer temperatures. As with many other industries, there is also a growing cyber threat as rail IT systems become increasingly automated and interlinked with global networks.

Integrating old and new infrastructure

There is the more prosaic problem of ageing rail infrastructure, which will need upgrading or replacing as it reaches the end of its useful life. Integration of new infrastructure and systems with existing legacy assets, while maintaining standards of safety and efficiency, is also a key challenge faced by some of the new passenger lines under construction.


With older fixed block signalling systems being replaced with moving block systems, track beds and rolling stock need to be updated with sensors that enable the signalling systems to create ‘safe zones’ around the train – not only to improve safety, but to enable higher-capacity rail traffic on increasingly crowded urban networks.

Moving block signalling is being utilised on parts of Melbourne’s rail network, not only with installation on the new Metro Tunnel, but also as an upgrade to existing infrastructure on the Cranbourne, Pakenham and Sunbury lines, which Rail Projects Victoria says will increase peak time capacity by 45 per cent and help deliver a ‘turn-up-and-go’ network, similar to those in London, Singapore and Hong Kong. The project also requires updates to existing conventional signalling infrastructure so that freight and regional passenger services can operate on the same system.


In addition to collisions between trains, derailments continue to be a major safety issue faced by rail operators. There have been concerted efforts to reduce the numbers of level crossings in Australia in recent years, but while the risk of derailment from landslips or accidents is difficult to eliminate, the risk from more common causes of derailments such as damaged rails or trackbed and defective wheels on rolling stock can be more readily mitigated.

Some of these issues can be addressed by technology – such as trackside monitoring systems that use lasers and cameras to monitor wear and defects in wheels, braking systems and other parts of its wagons to reduce the chance of derailments. Other causes of derailment can be reduced by stepping up inspections and maintenance regimes – whether deploying inspection vehicles with ultrasound/laser detectors for monitoring damaged rails, or physical inspections to ensure trackbeds aren’t at risk of flooding or erosion from malfunctioning culverts.

Reducing growing risks

As the Australian rail sector continues to evolve, insurers can actively assist the sector not only with risk transfer mechanisms, but also with the management of rail infrastructure and rolling stock risks.

The insurance industry can deploy its knowledge and experience of managing rail sector risks in advising clients on resilient design and construction methods, management of specific perils during construction and operation, the challenges of integrating new and legacy tracks and signalling, and the implementation of rigorous monitoring and maintenance programmes.

Allied World’s risk management and underwriting teams are able to draw on a wealth of first-hand experience from being a risk management partner for rail projects across North America, Europe, the Middle East, Asia and Australia/New Zealand.

This sponsored editorial is brought to you by Allied World. For more information, please visit

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