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I. Graifer, Chairman of the Board of directors of LUKOILV. I. Graifer, Chairman of the Board of directors of LUKOILV. Alekperov, President of OAO LUKOIL V. Alekperov, President of OAO LUKOIL Oilmen of LUKOILOilmen of LUKOILProduction facilities of the Caspian Yuri Karchagin fieldProduction facilities of the Caspian Yuri Karchagin fieldOffshore platforme D6 in the Baltic Sea. Kratsovskoe fieldOffshore platforme D6 in the Baltic Sea. Kratsovskoe field Permnefteorgsintez Refinery Permnefteorgsintez RefineryVolgograd RefineryVolgograd Refinery Uhtaneftepererabotka Refinery Uhtaneftepererabotka Refinery Nijnegorodnefteorgsintez Refinery Nijnegorodnefteorgsintez RefineryMini refineries in KogalymMini refineries in KogalymPetrotel-LUKOIL (Romania)Petrotel-LUKOIL (Romania)LUKOIL Neftokhim Burgas (Bulgaria)LUKOIL Neftokhim Burgas (Bulgaria)Filling station commissioning in New-YorkFilling station commissioning in New-YorkChange of brand of a filling station in the USAChange of brand of a filling station in the USAOfficial ceremony to mark the commencement of production at West Qurna-2 oilfield in Iraq. 29.03.2014Official ceremony to mark the commencement of production at West Qurna-2 oilfield in Iraq. 29.03.2014Dmitry Medvedev, Prime Minister of the Russian Federation, visited the ice-rsistant platform at the Y.Korchagin field in the Caspian Sea. October 02, 2013Dmitry Medvedev, Prime Minister of the Russian Federation, visited the ice-rsistant platform at the Y.Korchagin field in the Caspian Sea. October 02, 2013President of Russia Dmitry Medvedev visited Krasnodarskaya Combined Heat and Power Plant (CHPP) of OOO LUKOIL-Kubanenergo and participated in the launch of a new 410 MW combined-cycle gas turbine (CCGT-410). October 8, 2011President of Russia Dmitry Medvedev visited Krasnodarskaya Combined Heat and Power Plant (CHPP) of OOO LUKOIL-Kubanenergo and participated in the launch of a new 410 MW combined-cycle gas turbine (CCGT-410). October 8, 2011The first large-tonnage oil shipment through the FOIROT (Varandey Oil Export Terminal). June 9, 2008The first large-tonnage oil shipment through the FOIROT (Varandey Oil Export Terminal). June 9, 2008Mounting of mooring cargo handling system on the FOIROT (Varandey Oil Export Terminal)Mounting of mooring cargo handling system on the FOIROT (Varandey Oil Export Terminal)Loading of FOIROT onto sea-going barges (Varandey Oil Export Terminal)Loading of FOIROT onto sea-going barges (Varandey Oil Export Terminal)Construction of Varandey TerminalConstruction of Varandey TerminalCommissioning of a catalytic reforming installation at the Volgograd RefineryCommissioning of a catalytic reforming installation at the Volgograd RefineryNakhodkinskoye gaz field commissioningNakhodkinskoye gaz field commissioningOil Spill Response Exercise in the Caspian SeaOil Spill Response Exercise in the Caspian SeaInternational training exercises at Varandey oil export terminalInternational training exercises at Varandey oil export terminalAnti-terrorism exercises at Vysotsk oil terminalAnti-terrorism exercises at Vysotsk oil terminalInternational anti-terrorism exercises at Volgograd RefineryInternational anti-terrorism exercises at Volgograd RefineryInternational exercise at RPK-Vysotsk LUKOIL-IIInternational exercise at RPK-Vysotsk LUKOIL-IIFire-prevention trainings in Kaliningrad RegionFire-prevention trainings in Kaliningrad RegionExercises Kaliningrad 2004Exercises Kaliningrad 2004Post cardsPost cardsSecuritiesSecuritiesPhotoPhotoEnvelopesEnvelopesStampsStampsReportsReportsFor Investors and AnalystsFor Investors and AnalystsFor ShareholdersFor ShareholdersGeneral Shareholders MeetingsGeneral Shareholders MeetingsShareholders EquityShareholders EquitySecurities trading statisticsSecurities trading statisticsFCA DisclosureFCA DisclosureFinancial ReportsFinancial ReportsLUKOIL Annual ReportsLUKOIL Annual ReportsLUKOIL Data BooksLUKOIL Data BooksLUKOIL Fact BookLUKOIL Fact BookSustainability ReportSustainability ReportCorporate Governance ReportCorporate Governance ReportFinancial FundamentalsFinancial FundamentalsOperating HighlightsOperating HighlightsPresentationsPresentationsFinancial CalendarFinancial CalendarInvestment calculatorInvestment calculatorAnalyst CoverageAnalyst CoverageInvestor Trips to Sites Investor Trips to Sites ContactsContactsPerm (2013)Perm (2013)Lower VolgaLower VolgaUzbekistanUzbekistanPerm (2003)Perm (2003)Karachaganak Karachaganak West SiberiaWest SiberiaEgyptEgyptShareholder Relations Policy of OAO LUKOILShareholder Relations Policy of OAO LUKOILInvestment calculatorInvestment calculatorDividendsDividendsDepositary Receipts Depositary Receipts FAQFAQContactsContactsAnnual General Shareholders MeetingAnnual General Shareholders MeetingExtraordinary General Shareholders Meeting Extraordinary General Shareholders Meeting History of Share Capital History of Share Capital ShareholdersShareholdersCompany SecuritiesCompany SecuritiesShare price informationShare price informationDebt securities price informationDebt securities price informationShare price historyShare price historyInvestment calculatorInvestment calculatorOil and Gas ReservesOil and Gas ReservesExplorationExplorationOil ProductionOil ProductionGas Production Gas Production Oil RefiningOil RefiningOils and lubricantsOils and lubricantsGas Processing Gas Processing PetrochemicalsPetrochemicalsCrude Oil DeliveriesCrude Oil DeliveriesGas DeliveriesGas DeliveriesPetroleum Product MarketingPetroleum Product MarketingPersonnel Management PolicyPersonnel Management PolicySocial Code of OAO LUKOIL Social Code of OAO LUKOIL Charity and Social ActivitiesCharity and Social ActivitiesSportsSportsCorporate retirement programCorporate retirement programSupport for Orphanages and Educational Establishments for ChildrenSupport for Orphanages and Educational Establishments for ChildrenEducation Programs Education Programs Support for Medical Institutions Support for Medical Institutions Social Project ContestSocial Project ContestSupport for Museums and Creative TeamsSupport for Museums and Creative TeamsPublishing ProjectsPublishing ProjectsSupport for Religious ConfessionsSupport for Religious ConfessionsTargeted AssistanceTargeted AssistanceCorporate VolunteeringCorporate VolunteeringOAO LUKOIL's Special Projects OAO LUKOIL's Special Projects Corporate Sporting Events Corporate Sporting Events Company Policy Company Policy Caring for the Environment Caring for the Environment cological monitoringcological monitoringCertificationCertificationImplementing the Kyoto ProtocolImplementing the Kyoto ProtocolGreen InitiativesGreen InitiativesNew Generation Motor FuelNew Generation Motor FuelUtilization of Associated Petroleum GasUtilization of Associated Petroleum GasGreen News LukoilGreen News LukoilRenewable energyRenewable energyAssociated SitesAssociated SitesSubsidiaries' WebsitesSubsidiaries' Websites
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Insurance Strategy and Policy

Insurance Strategy of OAO LUKOIL and its Subsidiaries

Operating 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 2014

In 2014, the insurance coverage of LUKOIL Group organizations is ensured in line with the requirements of a special Program approved by virtue of the decision of LUKOILs Management Committee.


The 2014 Insurance Coverage Program of LUKOIL Group organizations (hereinafter - the Program) is aimed at ensuring efficient insurance coverage of LUKOIL Group organizations in 2014, namely, protection from the risks that pose a threat to the business of LUKOIL Group, to the lives and health of the employees and to property interests of the shareholders (parties) of LUKOIL Group organizations and investors.


The following types of insurance were identified in 2014 as correlating with the risks associated with operations of LUKOIL Group organizations:

  • compulsory insurance (compulsory civil liability insurance of the owner of a hazardous facility against infliction of damage due to a potential accident at the hazardous facility, compulsory civil liability insurance for vehicle owners);
  • insurance of property interests of LUKOIL Group organizations against irretrievable risks (insurance of: property of refineries and petrochemical organizations; property of gas processing plants belonging to organizations of the Exploration&Production and Refining&Marketing business segments; property belonging to organizations of the Power Engineering business sector; property interests of ship-owners and offshore oil-and-gas production companies; voluntary liability insurance of the terminal-operator companies; liability insurance of the refueling operators);
  • liability insurance for directors, officials and corporations as related to OAO LUKOIL (a requirement of the London Stock Exchange);
  • socially important types of insurance (voluntary health insurance for employees, accident insurance for employees);
  • insurance of property interests of the oil-and-gas production organizations and petroleum product supplying organizations of LUKOIL Group against risks posing a threat to their business, etc. 

Particular types (areas) of insurance are implemented based on the following:

  • property valuation for insurance purposes (the valuation process is conducted by independent appraisal companies recognized in the international and domestic appraisal markets);
  • surveys of high-risk facilities and control over fulfillment of recommendations by the external surveyor (inspections are conducted by independent surveying organizations, international global brokers and major reinsurance companies).


As compared with the 2013 Program, the new Program provides for increased coverage of property and liability insurance, including the insurance of:

  • property interests of the refineries and petrochemical organizations of LUKOIL Group (due to the commissioning of new capacities);
  • property interests of the offshore oil-and-gas production companies of LUKOIL Group (due to the drilling and commissioning of new wells);
  • liability of directors, officials and corporations as related to OAO LUKOIL (in line with the global trends as related to the limits for the said type of insurance). 

Insurance coverage is a key element integral to LUKOIL Groups overall corporate system of risk management.



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