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Laurent Barbagli named to Risk Management Honor Roll®

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Laurent Barbagli named to Risk Management Honor Roll<sup>&reg;</sup>

Laurent Barbagli, group risk and insurance manager at Paris-based Lafarge S.A., has succeeded in streamlining an insurance program against a backdrop of a company expanding into emerging markets.

Lafarge, one of the leading building materials companies in the world and one of France's largest listed companies, had the ambition to change its insurance function from one focused on procurement to a risk market model, Mr. Barbagli said.

The company, which in recent years has seen great expansion into emerging markets, also has seen innovation in its products as part of a commitment to “build better cities,” Mr. Barbagli said.

This has meant the company no longer simply sells products, but now sells solutions — which has led to the evolution of some liability risk.

This necessitated a real partnership approach with brokers and insurers, Mr. Barbagli said. His innovation helped him earn his place on Business Insurance's 2015 Risk Management Honor Roll®.

“So we did a cross-functional project” on risk and insurance across the whole organization to enhance the link between insurance and risk management to the company's business and objectives.

A project manager with a finance background was recruited at the start of the effort to help drive the cross-functional optimization program.

After two years, two engineers were recruited into the insurance and risk management function, he said.

“This is a company of engineers. I am not an engineer, so I need to be able to communicate with them and make risk and insurance solutions match with industrial risks,” Mr. Barbagli said.

The risk management function at Lafarge is a relatively small one, he said, and so it is vital for the company's brokers to act as an “external resource to help us achieve our objectives.”

And because Lafarge is a global company, it needs to have the support of its brokerages' global corporations, he added.

Lafarge works with two of the major brokerages, whom Mr. Barbagli declined to name.

“We have a team we work with in France, but also we work with their top (representatives) in the United Kingdom and in New York, because we need global support and global knowledge,” he said.

Lafarge assesses the performance of its brokers on about 50 items every quarter, Mr. Barbagli said.

This is done in conjunction with a consultant from the United Kingdom to fairly assess the brokers' performance, he said.

One of the streamlining efforts that Mr. Barbagli and his team have undertaken has involved the company's captive insurers and has resulted in cost reductions for the group.

He said that trying to strike the correct balance between self insurance and risk transfer has been one of his key objectives in optimizing the company's insurance program.

And a global optimization project of the group's insurance coverage also has led to substantial savings of about €10 million ($10.6 million). That project saw an audit of the company's insurance coverages to eliminate any local insurance that duplicated group coverage, and cancel any insurance coverages that did not meet group objectives.

Two major areas where Mr. Barbagli has achieved significant strides in optimizing the company's insurance coverage have been in marine and trade credit.

Mr. Barbagli undertook a global review of the company's marine coverage and consolidated it with the appointment of a single broker worldwide.

Marine cargo, charterers liability, and hull and protection and indemnity coverage were gathered under one broker and three insurers resulting in savings of about €500,000 ($530,200).

In trade credit, Mr. Barbagli obtained the sponsorship of the Lafarge chief financial officer to work with local credit managers and work toward building a multinational program for trade credit coverage.

A brokerage tender in 2012 led to the appointment of a single broker worldwide for trade credit. To date, eight countries have been consolidated within the program resulting in cost savings of $2.3 million so far.

“For some risks you need to think globally but act locally, you cannot just impose a scheme from Europe,” he said.

In the area of fire losses — a major risk area for Lafarge — Mr. Barbagli has been able to reduce the number of losses suffered by the company by 10% by obtaining €60 million ($63.6 million) of capital expenditure to better protect 60 cement plants.

In recent years, Lafarge's involvement in emerging markets has shifted to about 60% of its activity from around 30%, and this has brought many challenges.

“One of my roles has been to align emerging countries' risk management and insurance as much as possible with developed markets,” he said.

“This is very challenging in some countries which is why as a (risk management and insurance) function you need to be directly involved in the market alongside a selected broker and insurer,” Mr. Barbagli said. “You need to access lots of insurance markets, and you need a global view, global coverage and global control.”

One of Mr. Barbagli's achievements has been to build an insurance program for emerging countries in the Middle East, including Iraq and Pakistan. Under that program, five cement plants with an insured value of $1.3 billion are now covered according to the group's standard coverage.

Mr. Barbagli said one of his major objectives has been to achieve “sustainable, long-term” insurance coverage for the firm and reduce volatility.

This, he said, does not mean always choosing insurance coverage on the basis of lowest cost, but instead working with partners such as brokers and insurers to ensure that the coverage is sustainable and appropriate.

While cost reductions are welcome, “it is not just about getting the best cost” but rather a commitment to a sustainable insurance program, he said.

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