EDF / 2018 Reference document

RISK FACTORS AND CONTROL FRAMEWORK Insurance

2.4.3

LITIGATION ARISING AFTER THE CLOSING OF THE 2018 FINANCIAL YEAR

None

2.5

INSURANCE

2.

Implementation methods Since 2004, the Audit Committee is presented with an annual update on the costs of covering EDF’s risks through insurance or by transferring risks to the financial markets. An update on insurance, as well as a review of the insurability of Group risks, was presented to the Audit Committee in December 2018. Since 2011, a Strategic Insurance Policy Committee (“COSA”), currently chaired by the Finance and Investments Director, provides an opportunity for the business lines and the Finance department to reflect on changes to and procedures for implementing the insurance policy, in particular the main characteristics of the programmes. The Insurance Division and the Group Risk Department produce an annual analysis of the risk mapping at Group level, supplemented by the insurance coverage system in place. Based on this shared view, EDF is in a position to improve, and, where necessary, extend the coverage of insurable risks in accordance with the principles established by the Group in this area. The goal of the Group's insurance programmes is to integrate the controlled subsidiaries as broadly as possible, in order to homogenise risk coverage and streamline its management, on the one hand, and to control the corresponding insurance costs, on the other hand. In accordance with the principle of independence of management of the regulated subsidiaries, RTE is not included in the Group's insurance programmes (2) . Insurance contracts, according to market practice, include exclusions, limits and sub-limits. Like all major French and international groups, EDF uses captive insurance companies and mutual insurance companies to supplement coverage provided by the traditional insurance markets. The EDF's captive insurance companies are: Wagram Insurance Company DAC, an insurance company founded in 2003 in ■ Dublin, which is involved in the majority of the Group’s insurance programmes; Océane Re, a reinsurance company established in 2003 in Luxembourg, to ■ reinsure EDF’s nuclear civil liability. In addition, Framatome has had a reinsurance company (Tereco) in Luxembourg since 21 December 2018. EDF is also a member of the Oil Insurance Limited (OIL) mutual insurance company in order to deal with the risks of damage (excluding overhead networks) to the property owned by the Group or under concession (EDF and its consolidated subsidiaries). OIL is an insurance mutual company which provides its members with cover for property damage. The scope covered includes inter alia nuclear power plants (the conventional portion), fossil fuel-fired power plants, hydropower facilities, network substations and exploration and production assets. The Group’s damage insurance programmes combine this cover provided by OIL and covers provided by market insurers. The EDF Group is also a member of the European Liability Insurance for the Nuclear Industry (ELINI), the European Mutual Association for Nuclear Insurance (EMANI), the Nuclear Industry Reinsurance Association (NIRA) and Blue Re, which are mutual insurance companies that manage cover in this field for European nuclear power operators. The captive and mutual insurance companies enable EDF to reduce the total amount of premiums paid and, more generally, the cost of its insurance schemes. USE OF CAPTIVE INSURANCE COMPANIES AND MUTUAL INSURANCE COMPANIES 2.5.2

In order to protect its assets and limit the impact of certain events on its financial position, the EDF group has dedicated insurance programmes that cover its major risks in terms of property damage, civil liability and insurance of persons. Nuclear risks are subject to the specific civil liability regime described below.

2.5.1

INSURANCE ORGANISATION

AND POLICY The Group Insurance Division is responsible, while respecting the management independence of the regulated infrastructure operators, for preparing the insurance policy of the EDF group and organising its implementation throughout the Group, in order to continuously optimise the overall costs of its insurable risks (1) . Its duties are to: continuously analyse cover for the EDF Group’s risks in conjunction with the ■ Group Risk Department: analysis by business line, entity and project; establish rules for the Group’s entire scope that enable covering all risks that can ■ and must be covered, as well as optimising the total cost thereof and managing volatility; promote and apply these rules to all Group entities, using appropriate means and ■ in compliance with governance rules; and develop and monitor the tools necessary to perform the above tasks, including ■ within the subsidiaries reporting to the Insurance Division: EDF Assurances and the Group’s captive insurance companies (see section 2.5.2. “Use of captive insurance companies and mutual insurance companies”). The Insurance Managers of entities and controlled subsidiaries that join the Group’s programmes are responsible for: ensuring that all risks are insured; ■ scheduling prevention inspections and overseeing implementation of the ■ resulting recommendations; reviewing cover strategies and amounts declared (risk quantification); ■ analysing losses and participating in claims handling. ■ This work, which is carried in close conjunction with the Group Insurance Division, enables to continuously improve the quality of information about insurable risks as programmes are renewed and prevention inspections are carried out (assessment of maximum possible losses – “MPL”). In connection with prevention actions, the Insurance Division establishes and oversees implementation of the site inspections programmes. The Group insurance policy was approved by the Executive Committee in January 2017. Objectives The insurance policy stipulates the risks that the Group decides to transfer to the market and the general principles for optimising such transfers: grouping purchases by setting up Group insurance programmes, allocating risks between traditional markets and other types of cover (specialised mutual insurance companies, transfers to the financial markets, etc.), individual and Group excesses (in general, only major risks are transferred), optimising intermediation costs.

Risks that can be transferred to the insurance markets and the alternative markets. (1) Exit effective since 31.03.15. (2)

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EDF I Reference Document 2018