The Group strictly complies with Russian legislation and legislation of other countries in which the Group enterprises operate, in terms of indemnity coverage, and it purchases all relevant insurance under Russian or any other applicable legislation.
The Gazprom Neft Group undertakes insurance:
- to ensure effective protection of shareholders’ property interests;
- to comply with the law of the Russian Federation;
- to provide efficient loss financing and loss management;
- to receive accompanying consulting services in assessing risks subject to insurance and recommendations on mitigating these risks;
- to implement employee motivation and social benefit programmes as part of the social benefits package.
The Group applies a centralised approach to organising insurance coverage in order to achieve maximum economic efficiency relating to the amount of risk placed on the insurance market. This centralised approach involves the development and implementation of unified approaches to risk insurance across all Group entities. To that end, it is mandatory for all subsidiaries to adopt this approach to insurance. Subsidiaries may submit proposals for further improvements to the Group’s existing approach to risk insurance. The Group develops, approves and keeps up-to-date regulations and methodologies concerning certain types of insurance, which take into account specifics of insurable risks.
The Group insures and reinsures its risks only with insurance organisations meeting its requirements for reliability and quality of risk allocation. In developing terms of insurance contracts, the Group actively uses self-insured retentions (SIR), that is the ability to independently (without involving the insurance market) cover indemnity costs. The level of SIR is understood as a value equal to the sum amount of potential losses throughout one year across all Group’s subsidiaries, which will worsen ROACE, calculated on the basis of the Group’s consolidated business plan, by five percent. Risks, the realisation of which may lead to a loss exceeding the level of self-insured retention, are subject to mandatory voluntary insurance.
Listed below are the Group’s key insurable risks and examples of terms of coverage for these risks in 2020.
Insurance coverage of the Gazprom Neft Group includes:
- for oil-producing subsidiaries: insurance of fixed production assets on an «all-risk» basis with indemnity limit of up to ₽4.5 billion for each covered loss for onshore assets, and up to €2.4 billion for offshore assets, including projects on the continental shelf;
- for oil-producing subsidiaries: business-risk insurance (loss of profits and fixed costs during downtime) with indemnity limit of up to ₽800 million for each covered loss;
- for refining subsidiaries: insurance of fixed production assets on an «all-risk» basis, and insurance of business risks (loss of profits and fixed costs during downtime) with a combined indemnity limit (on property and business risks) of up to €0.9 billion for each covered loss;
- export cargo insurance (crude oil, refined petroleum products and petrochemicals) with indemnity of up to $50 million for each shipment;
- unlimited insurance of construction and installation risks in major construction projects (of total cost over ₽600 million (for oil-production companies), and €50 million (for refining companies), reconstruction and modernisation of main production facilities;
- refueller’s liability insurance with indemnity limit of up to $750 million for each covered loss;
- compulsory (required by law) liability insurance, in particular, compulsory liability insurance of enterprises operating hazardous production facilities and compulsory insurance against civil liability in respect of motor vehicles;
- voluntary medical insurance for employees, accident insurance;
- liability insurance of members of Gazprom Neft’s Board of Directors and management with indemnity limit of $50 million for each covered event (with certain restrictions on insurance coverage for independent directors);
- shipowners’ liability insurance with a limit from $1.0 to $3.0 billion;
- hull insurance for marine, land and air transport;
- voluntary third-party liability insurance, with extended indemnity pursuant to the Russian Federation’s environmental liability with a limit of €500 million for each covered loss;
- control-of-well insurance against a blowout (additional costs relating to a blowout) for wells worth more than ₽600 million, or wells located in oilfields with abnormally high formation pressure and/or temperature, with indemnity limit of up to ₽5.5 billion for each covered loss for offshore wells (offshore projects), and up to ₽6 billion for onshore wells (exploration wells in newly-developed fields);
- accounts receivable insurance for overdue payments for oil products supplied by Gazprom Neft’s enterprises, with indemnity limits of up to ₽1.5 billion per customer.