4.4 Legal risk - Scor

available and the reserves are adjusted if necessary. Management considers many factors when establishing reserves,
including:
• information from ceding companies;
• historical developments, such as reserve patterns, claims payments, number of claims to be paid and product mix;
• internal methods to analyze the Group’s experience;
• most recent legal interpretations concerning coverage and commitments;
• economic conditions;
• biometric developments such as mortality and morbidity; and
• socio-economic factors such as policyholder behavior.
Reinsurance reserves are presented gross excluding shares retroceded to SCOR’s reinsurers and measured on the level of
individual reinsurance contracts or homogeneous segments of contracts. Retroceded reserves are estimated under the
same methods and assumptions and presented as assets.
(a) Non-Life business
In determining the amount of its reserves, the Group generally uses actuarial techniques that take into account quantitative
loss experience data, together with qualitative factors, where appropriate. The reserves are also adjusted to reflect the
volume of business underwritten, reinsurance treaty terms and conditions, and diversity in claims processing that may
potentially affect the Group’s commitment over time.
However, it is difficult to accurately value the amount of reserves required, especially in view of changes in the legal
environment, including civil liability law, which may impact the development of reserves. While this process is complicated
and subjective for the ceding companies, the inherent uncertainties in these estimates are even greater for the reinsurer,
primarily because of the longer time period between the date of an occurrence and the request for payment of the claim to
the reinsurer, the diversity of contract development schemes, whether treaty or facultative, dependence on the ceding
companies for information regarding claims, and differing reserve practices among ceding companies. In addition, trends
that have affected development of liabilities in the past may not necessarily occur or affect liability development to the same
degree in the future. Thus, actual losses and policy benefits may deviate, perhaps significantly, from estimates of reserves
reflected in the Group’s consolidated financial statements.
Claim reserves for losses and claims settlement expenses are recognized for payment obligations from reinsurance losses
that have occurred but have not yet been settled. They are recognized for reserves for reinsurance losses reported before
the reporting date and reserves for reinsurance losses that have already been incurred but not yet reported (IBNR), and are
calculated on the basis of their ultimate cost, undiscounted, except for workers’ compensation claims which are discounted
in the U.S.
Unearned premium reserves are related to written premiums receivable but allocated to future risk periods.
Share of retrocessionaires in insurance and investment contract liabilities are calculated according to the contractual
conditions on the basis of the gross reserves. Allowances are established for any specific expected credit risks.
(b) Life business
In Life business, policy linked liabilities include mathematical reserves, unearned premium reserves and claim reserves.
Mathematical reserves are calculated underwriting reserves relating to guaranteed claims and benefits of ceding companies
in life reinsurance. Mathematical reserves are estimated using actuarial methods on the basis of the present value of future
payments to cedants less the present value of premium still payable by cedants. The calculation includes assumptions
relating to mortality, disability, lapses and the expected future interest rates. Actuarial principles used allow an adequate
safety margin for the risks of change, error and random fluctuation. They correspond to those used in the premium
calculation and are adjusted if the original safety margins are no longer considered sufficient.
Claim reserves for losses and claims settlement expenses are recognized for payment obligations from reinsurance losses
that have occurred but have not yet been settled. They are recognized for reserves for reinsurance losses reported before
the reporting date and reserves for reinsurance losses that have already been incurred but not yet reported (IBNR).
Unearned premium reserves are related to written premiums receivable but allocated to future risk periods.
Shares of retrocessionaires in the insurance and investment liabilities are calculated according to the contractual conditions
on the basis of the gross reserves. Allowances are established for estimated credit risks.
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