Insurance as a risk management tool
Securitas’ insurance and claims strategy is to “act as if uninsured”. This means that while external insurance is used to protect the balance sheet and minimize fluctuations in earnings, our day-to-day task is to perform our assignment as if we do not have any insurance in place.
One important part of our risk management work involves taking a proactive approach to contracts and assignment instructions in order to prevent claims from occurring. From a risk management perspective, it is important that the contract clearly defines the assignment to be performed by Securitas and that our employees’ assignment instructions mirror the contract. Our contract management process strives to find a fair distribution of risk between Securitas and our customers.
Importance of active claims management
Another significant part of Securitas' risk management work involves active claims management, as well as ongoing claims analysis of frequent and large losses with the aim of identifying the underlying driving forces. The claims are analyzed to find out if there are certain types of services, contracts, regions and so forth that cause insurance claims. Claims reports with updated information on claims and reserves are sent to all local risk managers and controllers on a monthly basis. Regular meetings are also held with the insurance companies and loss adjusters with the aim of continuously developing the claims handling process and claims prevention measures. As the Group's external insurance premiums are partly determined by the historic loss record, a favorable loss record will contribute to lower premiums and a lower cost of risk.
Insurance programs are procured with the objective of creating a balanced and cost-efficient protection against negative financial impact. Securitas seeks to achieve economies of scale through coordinated insurance programs and the optimal utilization of the Group's insurance captives. The strategy is to cover the more frequent claims arising in Securitas' own books. First, a local deductible is charged to the branch that has caused the claim; after that, our own insurance companies (captives) cover part of the cost. Using insurance captives gives the Group an opportunity to handle part of the claims process internally, and provides Group Management with an option to establish some independence from the cyclical nature of commercial insurance markets (see the graph below).
The design and purchase of all insurance programs is based on the risk exposure identified using the business risk evaluation model.
Distribution of risk with respect to claims
The cost for high-frequency claims with a low value are charged to the local subsidiaries as a “local deductible cost” and to Securitas’ insurance captives. Non-frequent and larger claims costs are absorbed by the external insurance companies.
The following types of insurance are strategically important to the Group and are the subject of central purchasing:
- liability insurance, including aviation liability and aviation war liability
- directors' and officers' liability insurance
- fiduciary liability insurance
- employment practice liability insurance
Benefits for our clients
An important advantage of our Global insurance programs is that our clients can be confident that Securitas' high-quality insurance cover is consistent in all markets.