A streamlining of the captive insurance arrangements for Lafarge S.A. has been a major achievement for Laurent Barbagli, the company's group risk and insurance manager.

As a result of a strategy to simplify risk financing and management at the group level and to make the company's captives more profitable, Lafarge has increased its property and business interruption retentions, among other things.

When Mr. Barbagli joined Lafarge in 2007, it had two U.S. captives that were separate from two group captive programs in Luxembourg, and he worked on a project to simplify those arrangements.

“Captives are not a target in themselves, they are a way of achieving a target,” Mr. Barbagli said. “They can help optimize the balance of self-insurance and risk transfer.”

Mr. Barbagli and his team consolidated the captives Lafarge owned “and worked to make this more profitable and get focused on the risk.” One of the company's U.S. captives, which had been in runoff, was closed, and the remaining U.S. captive now is fully reinsured by the group captive in Luxembourg. They have been brought under the management of a single captive manager, Mr. Barbagli said.

The group captive now has a balance sheet of $230 million — representing the entire retention of the company in one vehicle that fronts the coverage of a Vermont- and Luxembourg-domiciled captive.

The project to streamline the company's captive program was undertaken in conjunction with Lafarge's finance, legal and tax departments, giving greater buy-in and visibility to the project, according to Mr. Barbagli.

Lafarge considers its captives as insurers focused on optimizing self-insurance management and insurance costs, he said. As part of the optimization of the company's captive program, new insurance programs were integrated into the captives to diversify the underwriting and develop risk sharing.

Those programs were contractors all-risk, which was integrated in 2014; and cargo and credit insurance, which were added in 2012.

The change in underwriting policy for the captives also saw retentions increase. Lafarge recently increased its property and business interruption retention threefold “because we have the ability to do this thanks to enhanced risk management, improved risk profile, and more profitable captives,” Mr. Barbagli said.

Lafarge's group retention per loss on its property damage and business interruption program was increased to $17 million in 2014, up from $5.7 million.

This has helped make the captive a “proactive tool” to protect Lafarge from volatility in insurance market pricing, among other things, Mr. Barbagli said.

As part of the simplification of the captive program, Lafarge also worked to improve the support it received from its brokers and insurers, Mr. Barbagli said.

Lafarge as a company has an ethos that being “long-term is a value, you have time to do things,” Mr. Barbagli said, adding that he worked on securing long-term, sustainable relationships with key insurers that allowed them to better focus on Lafarge's needs, to align its insurance coverage in emerging markets and implement tailor-made policies.