APC 2010 Annual Report Download - page 45

DESCRIPTION OFTHEGROUP, ANDITSSTRATEGY, MARKETS ANDBUSINESSES
1
RISK FACTORS
Insurance
Schneider Electric’s strategy for managing insurable risks is
designed to defend the interests of employees and customers and
to protect the Company’s assets, the environment, employees,
customers and its shareholders’ investment.
This strategy entails:
•identifying and quantifying the main areas of risk;
•preventing risks and protecting industrial equipment; having
audits carried out at the main sites by an independent company,
launching a self-evaluation campaign for fi re risk for all of the
Group’s plants and distribution centres;
•organising and deploying business continuity plans and crisis
management resources, notably for health risks such as
pandemics, technical and political risks and natural disasters;
•carrying out hazard and vulnerability studies and safety
management for people and equipment;
•maintaining the necessary insurance cover for the main risks
facing Group companies under global programs. The Group
carefully screens insurance and reinsurance companies and
evaluates their solvency.
In addition, the Group has taken out specifi c cover in response to
certain local conditions, regulations or the requirements of certain
risks, projects and businesses. To extend guarantees and reduce
budgets, the Group coordinates purchasing of local cover.
Liability insurance
The integrated global liability insurance program set up in 2007
was renewed on January1, 2011. This “all risks except” program
represents adequate coverage of the Group’s exposure to liability
claims in connection with its businesses.
Certain specifi c risks, such as aeronautic or environmental risk, are
covered by specifi c programs.
Property damage and business interruption
insurance
A new global insurance program was put in place on July1, 2010,
for a term of two years. This is an “all risks except” contract which
covers fi re, explosion, natural disaster, machinery breakdown and
other events that could affect Schneider Electric’s property, as well
as operating losses caused by business interruption. Settlements
under the global program are capped at EUR350million per claim
and specifi c limits apply to certain risks, such as natural disasters
and machinery breakdown. These limits were determined on the
basis of scenarios of loss established by specialists and available
capacity in the insurance sector.
Assets are insured at replacement value.
Shipping and transport insurance
On January1, 2009, the Group implemented a new global shipping/
transport insurance program that covers all goods shipments,
including between Group facilities, by all means of transport, with
a maximum insured value of EUR15.2 million per convoy. This
program, which will be renewed in 2011, covers Group subsidiaries
that had previously been insured under local, non-integrated
contracts.
Self insurance
To optimise costs, Schneider Electric self insures certain frequent
risks through two captive insurance companies:
•outside North America, a captive reinsurance company offers
property/casualty and liability coverage capped at EUR11million
per year;
•in North America, a captive insurance company is used to align
deductibles and self-insured retentions imposed by the insurers
of automobile, liability and workers’ compensation primary layers.
Self-insured retentions range from USD0.5million to USD5million
per claim, depending on the risk. An actuary validates the
provisions recorded by the captive reinsurance company each
year.
The cost of self-insured claims is not material at the Group level.
Cost of insurance programs
The cost of the Group’s main insurance programs, excluding
captive reinsurance, totaled around EUR15million in 2010.
2010 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC 43