Hertz 2012 Annual Report Download - page 46

ITEM 1. BUSINESS (Continued)
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,
and for our long-term fleet leasing operations, we maintain some liability insurance coverage with
unaffiliated carriers.
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 Insurance Company Europe Limited, or ‘‘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. This coverage is
purchased from unaffiliated carriers for Spain. We also insure a portion of our European property risk
through Probus. 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 periods ended December 21, 2013, 2012, 2011 and
2010. For our international car rental operations outside of Europe, we also maintain liability insurance
coverage with unaffiliated carriers in such amounts as we deem adequate in light of the respective
potential hazards, where such insurance is obtainable on commercially reasonable terms.
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