Hertz 2010 Annual Report Download - page 43

ITEM 1. BUSINESS (Continued)
In addition, we offer optional liability insurance and other products providing insurance coverage, which
create additional risk exposures for us. Our risk of property damage is also increased when we waive the
provisions in our rental contracts that hold a renter responsible for damage or loss under an optional loss
or damage waiver that we offer. We bear these and other risks, except to the extent the risks are
transferred through insurance or contractual arrangements.
In many cases we self-insure our risks or insure risks through wholly-owned insurance subsidiaries. We
mitigate our exposure to large liability losses by maintaining excess insurance coverage, subject to
deductibles and caps, through unaffiliated carriers. For our international operations outside of Europe,
we maintain some liability insurance coverage with unaffiliated carriers. We also maintain property
insurance through our captive insurer, Probus Insurance Company Europe Limited, or ‘‘Probus’’ (with
the risk reinsured with unaffiliated insurance carriers) in Europe, subject to deductibles.
Third-Party Liability
In our domestic operations, we are required by applicable financial responsibility laws to maintain
insurance against legal liability for bodily injury (including death) or property damage to third parties
arising from the operation of our cars and on-road equipment, sometimes called ‘‘vehicle liability,’’ in
stipulated amounts. In most places, we satisfy those requirements by qualifying as a self-insurer, a
process that typically involves governmental filings and demonstration of financial responsibility, which
sometimes requires the posting of a bond or other security. In the remaining places, we obtain an
insurance policy from an unaffiliated insurance carrier and indemnify the carrier for any amounts paid
under the policy. As a result of such arrangements, we bear economic responsibility for domestic vehicle
liability, except to the extent we successfully transfer such liability to others through insurance or
contractual arrangements.
For our car and equipment rental operations in Europe, we have established a wholly-owned insurance
subsidiary, Probus, a direct writer of insurance domiciled in Ireland. In European countries with
company-operated locations, we have purchased from Probus the vehicle liability insurance required by
law, and Probus reinsured the risks under such insurance with Hertz International RE, a reinsurer
organized in Ireland, or ‘‘HIRE,’’ and / or HIRE Bermuda Limited, a wholly-owned reinsurance company
domiciled in Bermuda. Thus, as with our domestic operations, we bear economic responsibility for
vehicle liability in our European car and equipment rental operations, except to the extent that we
transfer such liability to others through insurance or contractual arrangements. For our international
operations outside of Europe, we maintain some form of vehicle liability insurance coverage with
unaffiliated carriers. The nature of such coverage, and our economic responsibility for covered losses,
varies considerably. In all cases, though, we believe the amounts and nature of the coverage we obtain is
adequate in light of the respective potential hazards.
Both domestically and in our international operations, from time to time in the course of our business we
become legally responsible to members of the public for bodily injury (including death) or property
damage arising from causes other than the operation of our cars and on-road equipment, sometimes
known as ‘‘general liability.’’ As with vehicle liability, we bear economic responsibility for general liability
losses, except to the extent we transfer such losses to others through insurance or contractual
arrangements.
To mitigate these exposures, we maintain excess liability insurance coverage with unaffiliated insurance
carriers at an aggregate of $200 million for policy period ended December 21, 2010 and $200 million for
the policy period ended December 21, 2011. In the past this policy limit has ranged from $100 million to
$235 million for policy periods from December 2004 through December 2009. For our international car
rental operations outside of Europe, we also maintain liability insurance coverage with unaffiliated
19