APC 2015 Annual Report Download - page 46

2015 REGISTRATION DOCUMENT SCHNEIDER ELECTRIC44
OVERVIEW OF THE GROUP’S STRATEGY, MARKETS AND BUSINESSES
1RISK FACTORS
7.7 Insurance policy
Schneider Electric’s general policy for managing insurable risks
is designed to defend the interests of employees and customers
and to protect the company’s assets, the environment and its
shareholders’ investment.
This strategy entails:
•identifying and analyzing the impact of the main risks;
•preventing risks and protecting industrial equipment; defi nition of
protection standards for sites (including when those are managed
by third parties) against the risk of fi re and malicious intent, audits
of the main sites by an independent loss prevention company,
roll-out of a self-assessment questionnaire for the other Group
sites;
•drawing up of business continuity plans, in particular for the
Group main sites and critical suppliers;
•roll-out of crisis management tools by the Group’s Security
Department;
•carrying out hazard and vulnerability studies and safety
management for people and equipment;
•implementing global insurance programs negotiated at the
Group level for all subsidiaries with insurers meeting the criteria
for fi nancial position recognized by insurance and reinsurance
players;
•optimization of fi nancing for frequent, low amplitude risks through
retentions managed either directly (deductibles) or through
captive insurance companies.
Liability insurance
A new three-year insurance program was put in place effective
January1, 2015 with the same insurer. This program, deployed i n
more than 70 countries, provides coverage and limits in line with the
current size of the Group and its evolving risks and commitments.
Certain specifi c risks, such as aeronautic, nuclear and environmental
risk, are covered by specifi c insurance programs.
Property damage and business interruption
insurance
The global insurance program renewed in July2014 for a duration
of two years was continued in 2015. This is an «all risks except»
contract which covers events that could affect Schneider Electric’s
property (including fi re, explosion, natural disaster, machinery
breakdown) as well as business interruption resulting from those
risks. The EUR350 million global limit of indemnity has been
increased for the largest sites. Certain guarantees, in particular,
natural disasters and machinery breakdown, have lower insurance
caps. These limits were determined on the basis of available
capacity on the market, loss scenarios prepared by the prevention
company that carries out the audits of our industrial sites and, for
earthquake risk, modeling carried out by specialized companies.
Assets are insured at replacement value.
T ransport insurance
The insurance program that covers all risks of loss or damage to
goods while in transit, including intragroup shipments, renewed on
January1, 2014, was continued in 2015.
Erec tion all risk insurance
The erection all risk insurance program providing cover for damage
to work and equipment for projects taking place at our clients’
premises was continued in 2015.
Othe r risks
In addition, Schneider Electric has taken out specifi c cover in
response to certain local conditions, regulations or the requirements
of certain risks, projects and businesses.
Self -insurance
To optimize costs, Schneider Electric self-insures certain frequent,
low-amplitude risks through two captive insurance companies:
•A captive company based in Luxembourg provides property
damage reinsurance worldwide capped at EUR5 million per year,
and liability reinsurance outside the USA and Canada capped at
EUR17million per year;
•For the entities located in the USA and Canada, a captive
insurance company based in Vermont (USA) is used to
standardize deductibles for civil liability, workers’ compensation
and automobile liability. These retentions range from USD1million
to USD5 million per claim, depending on the risk. An actuary
validates the provisions recorded by the captive company each
year.
The cost of self-insured claims is not material at the Group level.
Cost of insurance programs
The cost (including tax) of the Group’s main global insurance
programs, excluding premiums paid to captives, totaled around
EUR23.5million in2015.