|
|
 |
Insurance Strategy and Policy
 Insurance Strategy of OAO LUKOIL and its
SubsidiariesOperating activities of OAO LUKOIL ("LUKOIL" or the "Company") and
its subsidiaries, including production, refining and marketing of oil and oil
products, as well as other activities, are associated with a wide range of
financial, social and humanitarian risks. Existence of such risks and
possibility of their occurrence should not prevent OAO LUKOIL from achieving its
goal of becoming one of the leading oil companies of the world. Therefore
the Insurance System for OAO LUKOIL and its subsidiaries should become one of
the most important and integral elements of the general corporate risk
management system. The basis of the Insurance System for LUKOIL and its
subsidiaries (the "System") should be a set of specially developed economically
proven procedures, defined in the form of corporate norms and standards
mandatory for execution by all management bodies of OAO LUKOIL and its
subsidiaries. The System is currently developing, which is reflected
(including others) in the following internal documents:
- Regulations on HSE management system in a vertically integrated oil
company, OAO LUKOIL (approved by the President of OAO LUKOIL in 1999);
- Regulations on the procedure for investigation, accounting and
compensation of losses resulting from the incidents, operational faults,
accidents, emergencies in OAO LUKOIL's subsidiaries (approved by OAO LUKOIL
Order No. 35 dated 21.01.2000);
- Regulations on control and management of operational risks of OAO LUKOIL
and its subsidiaries (approved by OAO LUKOIL Order No.166 dated 06.08.2001).
Integrity of insurance protection of OAO LUKOIL and its subsidiaries,
independence of the System from the current status of OAO LUKOIL and its subsidiaries may be achieved
provided that a certain mission becomes a basis of this System. The mission of
the newly developed System should reflect its purpose, necessity and utility for
the society as a whole and, in particular, for OAO LUKOIL and its
subsidiaries. The mission of the Insurance System of OAO LUKOIL and its
subsidiaries can be defined as follows:
- To ensure stable operation and development of OAO LUKOIL and its
subsidiaries by economically effective insurance coverage against risks which
have a negative effect on the business of OAO LUKOIL and its subsidiaries,
health of personnel, shareholders' and investors' interests.
The
System should combine:
- Management bodies of OAO LUKOIL, its subsidiaries and their operating
divisions
- Divisions of OAO LUKOIL and its subsidiaries, which are entrusted with
ensuring risk control and management, as well as insurance protection against
risks which have a negative effect on the business, health of personnel of OAO
LUKOIL and its subsidiaries, and shareholders' and investors' interests;
- Division which implements control (calculation) of operational and
environmental risks;
- Insurance companies, protecting OAO LUKOIL and its subsidiaries,
personnel, as well as property interests of the shareholders and investors.
The listed participants should act and co-operate on a single
specially created information, procedural and regulatory basis. The
Fundamentals on the Insurance Strategy and Policy of OAO LUKOIL and its
subsidiaries should be reviewed and approved by the Management Board of OAO
LUKOIL. The mission is completed through reaching the following
objectives:
- Identification of all risks which might present a threat to the business,
i.e. to the stability of OAO LUKOIL and its subsidiaries;
- Complete and timely compensation of all financial losses (including damage
resulting from loss of crude oil, intermediate or end products; costs of
localization of accidents and liquidation of their consequences, as well as
associated mandatory costs, etc.) resulting from emergencies. Compensation
shall be effected by transfer of unplanned costs (time-wise and volume-wise)
for the coverage of probable losses to the category of planned and
economically feasible insurance payments;
- Recovery of property to the pre-accident condition;
- Full compensation of legal liability for inflicting damage to the life,
health and property of other persons and the environment;
- Full compliance with the requirements of OAO LUKOIL's Social Code with
respect to insurance of personnel of OAO LUKOIL and its subsidiaries.
The main principles of implementation of the defined mission are as
follows:
- Insurance protection through conclusion of relevant insurance agreements.
This implies transfer for insurance premium of risks to external insurance
markets. Transfer to external markets of potential losses from the risks of
man-caused character, natural calamities, civil liability risks etc. shall be
done for potentially large financial losses, their size being identified by
the Management Board of OAO LUKOIL. Transfer of risks to the external
insurance markets for insurance premium shall be done on a tender basis;
- Insurance protection by self-insurance. This implies creation of reserve
insurance funds of OAO LUKOIL and its subsidiaries to compensate losses
associated with the effects of identified and eventual risks. These reserves
shall be formed to cover the losses of the size defined by OAO LUKOIL's
Management Board, with gradual increase of boarder between insured and
self-insured risks;
- Packaging of similar risks to minimize the insurance costs;
- Allocation of costs for insurance protection of OAO LUKOIL and its
subsidiaries in an annual budget as a separate line.
Insurance Policy of OAO LUKOIL and its
Subsidiaries
The insurance policy is a way to implement the strategy in a
specific time period and defines the following basic factors:
- The list of risks which may have a negative effect on the business of OAO
LUKOIL and its subsidiaries and health of personnel, as well as shareholders'
and investors' interests. This implies definition of risks for the property
complex, risks of civil liabilities, specific risks;
- Types of insurance adequate to the risks associated with operating
activities of OAO LUKOIL and its subsidiaries, including types of insurance of
property, liabilities, specific risks;
- Limits of required and economically feasible insurance payments for the
selected types of insurance;
- Franchise amounts for the risks transferred for insurance broken down by
groups of assets.
The Management Board of OAO LUKOIL shall review in
compliance with the established procedure the current insurance policy every
year for the coming year. This review shall result in taking the insurance
program for OAO LUKOIL and its subsidiaries as a base by OAO LUKOIL's Board for
the coming year. During implementation of the insurance policy of OAO
LUKOIL and its subsidiaries, its units, which are obliged to control and manage
the risks, as well as to provide insurance protection from the risks which are
presenting a threat to the business and health of personnel of OAO LUKOIL and
its subsidiaries, as well as property interests of the shareholders and
investors, shall perform the following functions:
- Analyze information on the risks which may have a negative effect on the
business of OAO LUKOIL and its subsidiaries and health of personnel, as well
as types of insurance adequate to such risks;
- Develop proposals on the amount of losses subject to self-insurance in the
current year;
- Develop proposals on the limits of required and economically feasible
insurance payments and franchise amounts for the risks transferred to
insurance in the current year;
- Organize and hold tenders associated with insurance protection of OAO
LUKOIL and its subsidiaries;
- Present a list of companies specially authorized to provide insurance
protection of OAO LUKOIL and its subsidiaries in the specific time period;
- Control the acquisition of insurances by the authorized insurance
companies in the course of re-insurance;
- Control the activities of corporate self-insurance structures;
- Analyze current and potential status of the world insurance markets;
- Control timely notification of losses of OAO LUKOIL and its subsidiaries,
the status of reconciliation and payment of agreed losses.
The list of
potential external insurers (re-insurers) of the risks of OAO LUKOIL and its
subsidiaries was defined on the basis of assessment of their reliability,
financial stability, rating etc. The mandatory requirements to the
insurance companies (in addition to the above mentioned) providing insurance
protection for OAO LUKOIL and its subsidiaries (companies specially authorized
to perform insurance protection for OAO LUKOIL and its subsidiaries) are:
- Experience of co-operation with a large corporate client from highly risky
sectors of economy (primarily from the oil industry);
- Ability of the insurance company to perform constant and effective
monitoring of insured risks of OAO LUKOIL.
The purchase of insurance
policies from commercial international insurance companies shall be performed in
case of their compliance with the current rating of
Standard&Poor's. Re-insurance of risks, insured by the authorized
companies, shall become an obligation of the authorized companies. The
international insurers shall comply with similar reliability requirements, used
in the course of direct purchase of such companies' insurances. Insurance coverage of LUKOIL Group companies in
2013
In 2013 LUKOIL Group of Companies is insured under an ad hoc program,
approved by the Board of OAO “LUKOIL”.
The aim of LUKOIL Group Insurance Program 2013 (hereinafter the
Program) is to ensure economically viable and efficient insurance protection of
LUKOIL Group in 2013 from possible risks, constituting threat to LUKOIL Group
business operations, life and health of its employees as well as to property
interests of LUKOIL Group shareholders (stakeholders) and investors.
The following types of insurance coverage have been identified in
2013 as the types of insurance coverage corresponding to the risks accompanying
the operating activities of LUKOIL Group, as well as the types of insurance
coverage whose implementation is determined by the requirements of respective
financial institutions:
ü
compulsory insurance (compulsory insurance of civil liability of
vehicle owners, compulsory insurance of employer’s liability for injury or
disease to their employees arising out of operation of hazardous
facilities);
ü
catastrophe risk coverage of property interests of LUKOIL Group
(insurance of oil refining and petrochemical facilities; property of gas
processing, upstream and downstream subsidiaries; power assets; property and
liability of shipowners and offshore oil and gas production assets; voluntary
insurance of liability of terminal operators; insurance of jet fuelling
tankers);
ü
LUKOIL liability insurance of directors, officials and corporations;
ü
socially important insurance (voluntary health insurance, casualty
insurance of employees);
ü
insurance of property interests of oil and gas producing
organizations and insurance of LUKOIL Group organizations supplying oil products
against risks constituting threat to their business operations, etc.
Insurance programs are
implemented upon:
ü
evaluation of assets for the purposes of insurance (evaluation is
made by globally and domestically recognized independent appraisal
companies);
ü
surveys of high risk facilities and supervision of compliance of
facilities with recommendations of external surveyors (surveys shall be
performed by independent surveyors, international brokers and major reinsurance
companies).
The new program envisages larger coverage of property and
liability insurance, including:
ü
insurance of property interests of LUKOIL Group’s oil refining and
petrochemical facilities (as a result of commissioning of new capacities and
reevaluation of production capital funds);
ü insurance of property interests of LUKOIL Group’s oil- and
gas-producing facilities running offshore production (as a result of drilling
new wells and commissioning of new wells into operation);
ü
indemnification of directors, officers and corporations in relation
to OAO LUKOIL (in accordance with international insurance policies for this type
of coverage)
Insurance is one of the most important integral parts of the
corporate system of risk management within LUKOIL
Group. |
|
|
