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Overview of activities, risk factors
2.7 Risk factors
DANONE
REGISTRATION DOCUMENT 2015
42
Insurance and risk coverage
As regards risks other than financial market risks (which are de-
scribed in the above section), Danone has a global insurance coverage
policy that is based on stringent underwriting assessments and uses
insurance products from the worldmarket, depending on availability
and local regulations. This risk coverage is therefore consistent for
all companies over which Danone has operational control.
Insurance programs for property damage, business interruption and
commercial general liability risk are negotiated at the Company level
for all subsidiaries, with leading international insurers. The “all risks
except” policies are based on the broadest guarantees available on
the market, coupled with deductibles of varying amounts, which are
relatively low compared to those extended to groups of comparable
size to reflect the autonomous management of the subsidiaries. The
guarantee limits are set on the basis of worst case scenarios and
on insurance market availability. These programs were renewed
on January 1, 2015 for a term of two years; the total cost of these
programs was approximately €28.7 million in 2015.
Insurance programs for “traditional” risks, which require local
management, such as coverage of vehicle fleets, merchandise trans-
portation guarantees, work-related accidents (in countries in which
these accidents are covered by private insurance), and insurance
specific to some countries, are negotiated and managed in accor-
dance with local practices and regulations, within the framework
of precise directives provided and controlled by the Company. Total
premiums came to approximately €20 million in 2015.
Lastly, insurance programs for potentially significant special risks,
which require centralized management, such as the liability of the
Company's corporate officers, fraudulent acts, and assorted risks
(product recalls, credit risk, environmental risk, etc.) are negotiated
according tomarket availability, on the basis of scenarios estimating
the probable impact of any claims. The total cost of this category of
coverage amounted to approximately €4 million in 2015.
In addition, in order to optimize its insurance costs and properly con-
trol its risks, Danone has a self-insurance policy through its captive
reinsurance subsidiary Danone Ré (a fully consolidated entity). The
self-insurance policy applies to specific risks where the costs can
be accurately estimated as Danone is aware of their frequency and
financial impact. This concerns essentially (i) coverage of property
damage, business interruption and commercial general liability
for a large majority of Danone's companies (these self-insurance
programs are limited to frequent claims with amaximumof €7.5mil-
lion per claim) as well as transportation in some cases, and (ii) for
the French subsidiaries payments for death, long-term disability,
and education. Moreover, stop-loss insurance protects Danone Ré
against any increased frequency of claims. These self-insurance
programs are managed by professional insurers and the provisions
are determined by independent actuaries.