L'Oréal - 2018 Registration Document

2 Corporate Governance

RISK FACTORS AND CONTROL ENVIRONMENT

Insurance 2.8.5.3.8. The Group’s overall insurance policy

Claim activity under this programme has historically been low, which shows the extremely high quality requirements and safety standards applied by the Group in managing its operations and in designing and manufacturing its products. Property Damage and Interruption of Operations Fire, lightning, explosion, theft and natural disasters are insured within the limits of the products available on the insurance market. The Group has set up a global programme to cover its property, chiefly fixed assets and inventories (except where restrictions apply). This programme also includes a chapter on operating losses directly resulting from an insured property loss or damage. As the capacity of the insurance market is limited for certain risks, this programme includes sublimits, particularly as regards natural disasters. Finally, the insurance offering includes prevention inspections for the Group’s sites conducted by specialist departments of the leading insurer. Transport by road, sea and air of all flows of goods The Group has set up an insurance programme to cover the transportation of all its products. All subsidiaries benefit from the protection offered by this worldwide programme, which ensures that appropriate cover is provided (except where restrictions apply). Customer credit risk Group subsidiaries must set up credit insurance, assisted by head office and under the terms and conditions negotiated, in addition to their own credit management policy, provided that insurance cover compatible with their level of sales activity is available under financially acceptable conditions. Nevertheless, in a period of major economic slowdown, the credit insurance market may contract and the large insurance companies may decide to reduce their coverage of certain customers. Self-insurance Through its reinsurance subsidiary, the Group carries risk retention levels that are not material at consolidated level, and these are applicable over and above local deductible amounts. This involves one programme: “Property Damage and Interruption of Operations”.

The objective of the Group’s policy on insurance is to protect the Group’s assets and people from the occurrence of significant identified material and insurable risks that could adversely affect it. For that purpose, the Group has implemented global insurance programmes (in particular for the Property Damage & Interruption of Operations, Third-Party Liability and Transport risks) which make it possible to manage the insurance cover and provide for uniform insurance cover for all its subsidiaries throughout the world, except in countries where this type of arrangement is not permitted (see Restrictions below). National programmes have been set up in the countries in which global programmes cannot be deployed. This policy is applied as follows: at parent company level, the Group has negotiated s insurance programmes on a worldwide basis with first-rate insurance companies to cover its main risks on the basis of the cover available; at a local level, the national programmes are deployed; s in all cases, subsidiaries have to put in place mandatory s insurance cover, in order to meet their local regulatory obligations. The financial solvency of the insurers chosen is an important criterion in the Group’s insurer selection process. Most of the insurance programmes subscribed by the Group involve co-insurance. Globally, the world’s main insurance companies are involved in one or more of these Group programmes. General third-party liability includes operating liability, third-party liability related to products, and sudden and accidental environmental damage. The Group has had a programme in place for all of its subsidiaries across the globe for several years (except where restrictions apply). The programme covers the monetary consequences of the civil liability of Group entities, when they are liable. Integrated worldwide programmes General third party liability

REGISTRATION DOCUMENT / L'ORÉAL 2018

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