The document discusses the transfer of risk and outlines best practices. It introduces key speakers and covers topics like identifying risks, analyzing incidents and accidents, transferring risk internally and externally, and the importance of contracts and insurance. Examples are provided around supplier risks and lessons learned around properly reviewing supplier insurance and contracts to mitigate exposure. The optimal risk transfer involves a balanced approach of prevention, insurance, and self-insurance depending on the risk level and market capacity.

1. TRANSFER THE RISK
WHAT IS THE BEST ?
October 1st, 2013
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2. Introduction
 One of the most relevant particularity of a risk manager’s activity is
its responsibility to imagine and set up the transfer of risk.
 The transfer of risk may assume several aspects or possibilities.
 The transfer of risk must start with an internal evaluation and
preparation by the company which intends to do so.
 The transfer of risk obviously affects the organization which accept
to receive it as well as, potentially, the organization to whom the risk
could be retransferred
 The transfer of risk implies that all the parties involved must be
aware about what they are doing and what are the consequences
for themselves and for their correspondents
 We will study the link between insured, insurer and reinsurer and the
importance of risk management to succeed on it.
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3. Introduction of the speakers
 Gilbert CANAMERAS
Group Risk & Insurance Chief Officer, VP Finance
Chairman AMRAE
 Gaëtan LEFEVRE
Group Risk & Insurance Manager
Group CMI
Chairman BELRIM
 Michel JOSSET
Insurance, Prevention and Real Estate Manager
Goup FAURECIA
 Emmanuel FIERENS
Chief Underwriting Officer, Head of Business Solution
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4. What could go wrong ?
Risks, incidents and accidents
People
Property
Information
Finance
Liability
RISKS
Accidents,
Illness
Property loss
Business
interruption
Theft,
fraud
Product &
Environnement
claims
Currency,
Credit & other
risks

5. Transfer the risk – where is it ?
External world
Suppliers
Investors, competitors, ...
Internal world
Business profile
External world
Customers
Society
People
Property
Weather,...
Legal, ...
Results
LIABILITY
Information
LIABILITY

6. Example of a loss due to a supplier
1st experience, the 1st day as Faurecia risk manager :
 A staff of the external security company in charge of the watch service
in Audincourt bumpers plant considered that his skills were insufficiently
rewarded and wanted to be noticed by his hierarchy
 He ignited a fire on plastic parts in a large bumpers warehouse, failed to
extinguish the fire … but fully achieved his goal to be noticed by his
bosses
As a result :
 Warehouse + 6000 bumpers destroyed : loss of 2.2 M€
 Propane bottle storage affected. Luckily, no injury.
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11. Insurance status & Legal procedure
Faurecia property insurer indemnified the loss above the property damage
deductible (400k€)
The responsible was found legally incapable and had no resources
Faurecia & its property insurer started a recourse against the security
company (small company with limited liability insurance) and collected
1.1M€ from the security company liability insurer
The recourse was shared between Faurecia and its property insurer
This event emphasizes the importance of the exposure
suppliers and the importance of contractual prevention
due to

12. Liability : The (re)insurer experience
«The scene »
 The liability insurance market is segmented by domain :
(Comprehensive) General liability, Professional Indemnity (E&O),
Stand- alone Products liability, Motor liability, Marine liability, Aviation
liability, Pollution liability, Directors & Officers liability, ect..
 Depending upon its activities, to protect against its liabilities,
each Insured is required to purchase several of those insurance policies
 The “responses” of those insurance policies depend upon their nature
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13. Without full knowledge of the contracts signed by the Insureds,
to provide the appropriate insurance solutions for both parties,
the (re) Insurer must solve an equation at five factors :
3 factors iro Insured’s exposures
(U+A+E)
2 factors iro Insured’s contractual approach
(CM+CP)
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14. The (re)Insurer must well assess
the Insured’s exposures
Understand the Insured’ activities
Assess the risks inherent to the scope
Evaluate the reduction of
Products vs Services,
Underlying risks &
potential perils
Geographical
scope,
activity
scope
risks by the Risk
Management policy
Impact on
exposure level
Markets of
Insured’s
clients
Growth rational:
Organic, acquisition,
diversification,..
Business model: own
operations ; use of
Partners/ contractors –
Prevention & mitigation
capabilities
Development
plan
Joint Venturers, …
Strategic
objectives
14

15. The (re)insurer must well understand
the Insured’s exposures
U
+
Products vs Services,
Underlying risks &
potential perils
Markets of Insured’
Clients
A
Geographical
scope,
activity scope
Growth rationale:
organic,
acquisition,
diversification, …
+
E
Impact on exposure
level
Prevention & mitigation
capabilities
Business model: own
operations ; use of
Partners/ contractors –
Joint Venturers, …
Development plan –
strategic objectives
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16. The (re)insurer must well understand
the Insured’s contractual approaches
Contract Management
Parties to the deal:
definition of the
Insured(s)
Contractual Policy / Practices
Contractual
culture,
contractual
discipline,
legal support
Jurisdiction
Position towards
performance
guarantees,
financial loss
bearing
Retention vs
Transfer
of liability
Position towards:
hold
harmless /
waiver
of subrogation
Stability of contractual
relationship with Insured’
business Partners
(“repeat risks” vs
“transactional risks”)
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17. The (re)insurer must well understand
the Insured’s contractual approaches
CM
+
CP
+
Parties to the deal:
definition of the Insured(s)
Jurisdiction
Retention vs
Transfer
of liability
Contractual culture,
contractual
discipline,
legal support
Position towards
performance guarantees,
financial loss
bearing
Stability of contractual
relationship with
Insured’ business
Partners
(“repeat risks” vs
“transactional risks”)
Position towards: hold
harmless /
waiver
of subrogation
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18. Illustration : Main current technical issues by Occupancy
Electro Magnetic Fields (EMF)
: Telecom
Genetically Modified Organisms (GMO)
: Food, Agro
Nanotech
: Manufacturing
Mould, Chinese drywall
: Homebuilding
REACH – Registration, Evaluation, Authorization and restrictions of Chemicals : Chemicals
Pollution – Environment Impairment
: Oil& Gas, Manufacturing
Occupational Diseases
: Mining, Manufacturing
Silicosis
: Mining
Workers Compensation, Employers Liability
: Manufacturing
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19. Risk analysis
Faurecia depends more and more upon suppliers (supply of
products, service,... including presence on Faurecia sites)
Faurecia is seriously exposed in case of damage due to
suppliers if the latter is insufficiently insured or if a limit of
liability of the supplier exists in the contract.
Faurecia would get its indemnification from its Property or
liability Insurer but would lose its deductible and may suffer
increase of premium due to loss record if the Insurer can not
file recourse against the supplier.

20. Training set for purchasers
established with our broker
How to review & negotiate the liability & insurance provisions
in a supplier contract :
 Avoid a waiver of recourse or a too low limit of liability
from Faurecia side
 Obtain a sufficient level of liability coverage from the
supplier’s side
How to review the insurance certificates provided by the
suppliers

21. Level of liability insurance for the
supplier
Guidelines given to the purchasers. The level of insurance will
depend on :
 The type of supply : on site service, products (safety
subcomponents or not)
 The type of liability : professional liability, products liability
 The size of the supplier (local or worldwide)
 The country of origin of the supplier depending on the
maturity of the local liability insurance market

22. Faurecia minimum required covers versus
Local Insurance market offer by country
Pure servicing (cleaning, security, …)
Faurecia
Minimal
required
covers
Equipments (transfer,
conformity, IT,
maintenance)
Products (sorting,
retouche, interim work)
General Liability including Professional Liability : 15 M EUR
from which Pure Financial Loss/ Professional Liability : 5 M EUR
CHINA
General Liability including Professional
Liability 1,5 M EUR
From which Pure Financial
Loss/Professional Liability 1 M EUR
Idem
Idem
MEXICO
General Liability 15M EUR OK
from which Pure Financial
Loss/Professional Liability : 5 M EUR:
OK
Idem
Restrictions for
security equipment
Idem
-----

23. LESSONS LEARNT
In a large corporation where thousands of contracts are signed
yearly with suppliers, the insurance department can not review
each and every contract :
 Training of the purchasers is the key
 Absence of waiver of recourse is the main point to be
achieved
 Level of insurance of the suppliers : the expertise of the
brokers is needed to give realistic objectives to purchasers
 All should be well-received by the Insurer

24. The underwriting
by the liability (re)Insurer :
From the review of the parameters of the “Insured’s specific risk equation:
(U+A+E) X (CM+CP)
When the (re)insurer is satisfied with its risk mapping
When the (re)insurer has established loss scenarios of different scales
When the (re)insurer has identified what he does not know !
The (re)Insurer can come up with the Appropriate Solution,
negociated with the Insured and its Broker
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25. Aggravating items in a liability insurance policy
from an underwriter ‘viewpoint :
Each and Every versus Annual Aggregate
Accumulation between policies
Additional Insured, Joint-Venture
Reinstatement: Around The Clock or side by side
Full Prior Acts, Retro Date at Inception, Continuity Date
Extending Reporting Period
Aggregation: Batch or Serial Clause
Single year versus multi-years policies; Duplication of Limits
versus anti Stacking
Underlying Erosion and Drop-down
Defence costs outside limits of indemnity
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26. From our claim experience in liability classes ,
the risk transfer from the Insured’ viewpoint ….
Success Factors
• Adequate procurement policy
• Regular re-assessment of business
partners
• Alignment between contractual policy
and self financing capabilities +
liability insurance market capacity
• Regular gap analysis and remedies
embedded in the Risk Management
policy
• Knowledge of capacity levels
available in the concerned liability
insurance segments (class/country)
• Opening to Alternative Claim
Resolution before litigation
• Existence of monetary caps in
contracts
• Recognition of which size matters to
access adequate insurance solutions
Failure Factors
• Inadequacy between risks conditions
faced and contracts wording
• Insureds accept contract conditions
that he does not master
• Lack of knowledge of legal
environment where Insureds have
operations or sales of
products/services
• Insufficient awareness of
globalisation impact
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27. Risk Management
Standard Process
Define Strategic, Organisation and
Risk Management Context
C
O
M
M
U
N
I
C
A
T
I
O
N
Identify
Analyse
Evaluate
Treat
P
I
L
O
T
A
G
E
/
M
O
N
I
T
O
R

28. How to manage the identified risks ?
G
O
Prevention
Reduction
Transfer
the risk
Keep
the risk
L
•Workmen compensation
•Insurance
•Self insurance
•Vehicles
•Contractual aspects
•Deductible
•Property
•Subcontractor
•Liability
A
•Outsourcing
•Waiver of
recourse
SPECIFIC ACTION PLANS
•Prevention / Protection
programs
Incident Management
Risk Assessement
committee

29. Risk Management
Standard Process
Define Strategic, Organisation and
Risk Management Context
Identify
Analyse
Evaluate
Transfer
Treat
Protection/
Prévention

30. Q&A
THANK YOU
FOR YOUR ATTENTION
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31. Appendices
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32. Illustration : key features of
Professional Indemnity (PI) vs General Liability (GL)
PI: Damages arising from professional services breach
GL: Damages arising from operations
PI: Costs included within limit of indemnity
GL: Costs in addition to limits
PI: Written on claims-made basis
GL: Written on occurrence basis
PI: Financial loss claims
GL: Bodily injury and property damage with consequential
financial loss
PI: Allow additional Insured clearly determined
GL: Can provide additional Insured on blanket form basis
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33. Illustration : main items of vigilance today for tomorrow
anticipated manifestation (Sourcce Marsh Mac Lennan doc)
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