Thursday, 22 March 2012
French companies are driven to self-insurance for motor fleets
Facing higher premiums and dwindling offers for motor fleet insurance from the market, a growing number of French companies have looked at self-insurance strategies to guarantee their fleets are properly covered.
In order to help its members to tackle this challenging subject, Association pour le Management des Risques et des Assurances de l'Entreprise, AMRAE, has published a technical booklet on self-insurance arrangements for motor fleets.
“Some companies are adopting self-insurance schemes for tax reasons,” said Bernard Groschtern, the President of AMRAE's Motorcar commission and one of the authors of the study. “But others are being forced to do it because they simply do not have other options.”
The lack of adequate insurance products is felt especially by companies that need to protect a moderate number of vehicles. Of late they have faced high premiums and ever more exclusions in contracts.
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This situation has not been helped by the withdrawal of providers from the market and the problems currently faced by Groupama, a strong player in motor fleet insurance in France.
Big transport and logistics firms, whose fleets reach thousands of vehicles, do not suffer as many restrictions, according to experts.
“We wanted to send an alert to our members that self-insurance is an opportunity, but it also creates risks, especially in the economic and financial fields,” said Philippe Fauqueux, the Managing Director of claims sourcing firm Van Ameyde, who is also among the authors of the study.
Well designed self-insurance schemes can transfer risks efficiently and create tax savings for companies. But they also generate risks. Companies can suffer a lack of capacity to cover losses resulting from major events such as natural catastrophes.
The authors of the guidance pointed out that understanding the theory behind self-insurance arrangements is vital for risk managers to avoid problems in the future.
“We have noted that big brokers sometimes meet some difficulties to elaborate or offer the best solutions to their clients in motor fleet insurance,” Mr Groschtern said.
But the study points out that brokers remain the best route for companies that want to set up complex self-insurance structures for civil liability risks.
“Our conclusion is that there is not a single self insurance strategy that fits the needs of all companies,” said Mr Fauqueux.
Brokers surveyed by the authors believe that a self-insurance strategy for civil liability risks is appropriate for companies with a fleet of over 300 vehicles, or those that have a budget of €150,000 to €200,000 for fleet risk.
For damage programmes, a fleet of 100 vehicles or a €100,000 budget would justify taking a look at self-insurance, they said.
They also said all companies that maintain a fleet of more than 1,000 vehicles employ self-insurance schemes. But they need to be carefully thought out, as firms may have to take high losses in cases of natural catastrophes or fire, especially, for example, when a great number of vehicles are stored in a single parking lot.
A self-insurance strategy must be accompanied by a careful risk management policy, the booklet argues. The frequency of losses is an important factor to be taken into account.
Captives, for their part, are not seen as an adequate solution for most companies. They could be a viable option for firms with very high motor risks and large fleets that are central to their business strategy, the booklet added.
But it is very rare that the amounts involved justify the use of such instruments. “We do not recommend setting up a captive for motor fleet risks,” said Mr Groschtern, who is also the Risk and Insurance Director at Autolia, the motor services group.
The French language booklet was launched in Paris yesterday. Hard copy versions cost €12 and can be ordered from AMRAE's website, www.amrae.fr.
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