4.4 Legal risk - Scor

the models and could therefore generate losses which exceed those predicted. Reality is always more complex than that
reflected by the models and this represents a risk for SCOR.
Although the Group attempts to limit its exposure to acceptable levels, it is possible that multiple concurrent catastrophic
events could have a material adverse effect on its business, present and future revenues, net income, cash flows,
financial position, and potentially, on the price of its securities.
See “Section 6.1.3.4 – Catastrophe (Cat) risk and exposure controls” for further information on risk mitigation actions.
4.1.3 SCOR COULD BE SUBJECT TO LOSSES AS A RESULT OF ITS EXPOSURE TO TERRORISM
In the context of its business, SCOR may be exposed to claims arising from the consequences of terrorist acts. These
risks, the potential significance of which can be illustrated by 11 September 2001 attack on the World Trade Center
(“WTC”) in the U.S., can affect both individuals and property.
Certain countries do not permit the exclusion of terrorist risks from insurance policies. Due to these regulatory
constraints, the Group has actively supported the creation of insurance and reinsurance pools involving insurance and
reinsurance companies as well as public authorities in order to spread the risks of terrorist activity among the members
of these pools. It participates in pools created in certain countries, such as France (GAREAT), Germany (Extremus), the
Netherlands (NHT) and Belgium (TRIP), which allows the Group to have limited and known commitments. In the U.S.,
the Terrorism Risk Insurance Act passed in November 2002 for a period of three years, which was extended to
31 December 2007 by the Terrorism Risk Insurance Extension Act, was renewed for seven years,
until 31 December 2014 by the Terrorism Risk Insurance Program Reauthorization Act (“TRIPRA”). It established a
federal assistance program to help insurance companies cover claims related to terrorist acts. TRIPRA requires that
terrorist acts be covered by insurers. Despite TRIPRA, and the federal aid that it provides, the U.S. insurance market is
still exposed to some significant risks in this area. Therefore, SCOR monitors very closely its exposure to the U.S.
market, primarily because of the insurance obligation created by the law. In addition to the commitments described
above, SCOR does reinsure, from time to time, terrorist risks, usually limiting by event and by year of insurance the
coverage that ceding companies receive for damage caused by terrorist acts.
Beyond the potential impact on its non-life book, a terror event could also affect the Group’s life portfolio. Although the
insured losses from past events have been comparatively small in relation to the non-life losses, a future terrorist act,
such as a “dirty bomb”, could claim a substantial amount of insured lives.
As a result, future terrorist acts, whether in the U.S. or elsewhere, could cause SCOR significant claims payments, and
could have a significant effect on its business, present and future revenues, net income, cash flows, financial position,
and potentially, on the price of its securities.
See “Appendix B – II. Internal control and risk management procedures, B. Identification and assessment of risks” for
further information on risk mitigation actions.
4.1.4 SCOR COULD BE SUBJECT TO INCREASED RESERVES FROM BUSINESS THAT IT DOES NOT ACTIVELY
UNDERWRITE
A. SCOR is exposed to environment pollution and asbestos related risks
Like most reinsurance companies, SCOR is exposed to environmental pollution and asbestos related risks, particularly
in the U.S. Insurers are required under their contracts to notify the relevant reinsurer of any claims or potential claims
that they are aware of. However, the Group often receives notices from insurers of potential claims related to
environmental and asbestos risks that are not precise enough, as the primary insurer may not have fully evaluated the
loss at the time it notifies it of the claim. Due to the imprecise nature of these claims, the uncertainty surrounding the
extent of coverage under insurance policies and whether or not particular claims are subject to any limit, the number of
occurrences and new developments regarding the insured and insurer liabilities, it can, like other reinsurers, only give a
very approximate estimate of its potential exposure to environmental and asbestos claims that may or may not have
been reported.
Taking account of the above, it is difficult to estimate the reserves required for losses arising from asbestos and
environmental pollution and to guarantee that the estimated amount will be sufficient.
The reserve amount for these risks in addition to the number and the amount of losses are indicated in “Section 20.1.6 –
Notes to the financial statements, Note 16 – Contract Liabilities.” Data related to the reserves arising from the risks
related to asbestos and environmental pollution are also in “Section 4.1.5 – If SCOR’s reserves prove to be inadequate,
its net income, cash flow and financial position may be adversely affected.”
As a result of this imprecision and uncertainty, SCOR cannot exclude the possibility that it could be exposed to
significant environmental and asbestos claims, or have to increase its reserving level, which could have an adverse
effect on its business, present and future revenues, net income, cash flows, financial position, and potentially, on the
price of its securities.
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