4.4 Legal risk - Scor

mainly the significant concentration of premiums written thanks to a limited number of brockers. A significant reduction in the
business generated through these brokers could potentially reduce premium volume and net income.
(g) Geographic concentration
Like other reinsurance companies, SCOR may be exposed to multiple insured losses to property or to the person arising
from a single occurrence, whether a natural catastrophe such as a hurricane, typhoons, windstorm, flood, hail, severe winter
storm, earthquake, heat wave, or a man-made catastrophe such as an explosion, fire at a major industrial facility or an act of
terrorism. Any such catastrophic event may generate insured losses in one or more of the Group’s lines of business.
The frequency and severity of such catastrophic events, particularly natural hazards, are by their nature unpredictable. The
inherent unpredictability of these events makes forecasts and risk evaluations uncertain for any given year. As a result,
SCOR’s claims experience may vary significantly from one year to the next, which can have a significant impact on its
profitability, and financial position. In addition, depending on the frequency and nature of losses, the speed with which
claims are made and the terms of the policies affected, it may be required to make large claim payments within a short
period. SCOR may be forced to fund those obligations by liquidating investments in distressed market conditions, or by
raising funds under unfavorable conditions. In particular, its most significant exposure to natural catastrophes in Non-Life
relates to earthquakes, storms, typhoons, hurricanes, floods and other weather-related phenomena like hail or tornados.
The Group evaluates its natural catastrophe exposure by means of catastrophe modeling software.
The models it uses depend very much on the underlying parameters. Any future deviations in these parameters will produce
varying results depending on the sensitivity of the model to each parameter. Furthermore, the models can only be applied to
certain areas and must respect certain conditions. Catastrophic events could occur in areas not covered by 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.
(h) Other concentrations
Information on exposures to asbestos and environmental claims is included in Note 16 - Contract liabilities.
LIFE REINSURANCE
The main categories of risk for Life reinsurance underwritten by SCOR’s Life division, which is referred to in this Registration
document as “SCOR Global Life”, “Life” or its “Life division”, are biometric, behavioral and catastrophe risks as well as credit
risk (see “Credit Risk” below), market risks and currency risks (see “Market Risk” below).
(a) Biometric risks
The assessment of biometric risks is at the centre of underwriting in life reinsurance. These are risks which result from
adverse developments in mortality, morbidity, longevity or from epidemic/pandemic claims. These risks are evaluated by the
actuaries, research centers and medical underwriters of SCOR Global Life, who analyze and use information from SCOR
Global Life’s own portfolio experience, from the ceding companies as well as relevant information available in the public
domain, such as mortality or disability studies and tables as available from various sources, e.g., actuarial associations or
medical research bodies.
(i)
Mortality risk
Mortality risk is the risk of negative deviation from expected results due to higher than anticipated death rates resulting from
either the inherent volatility, an adverse long-term trend or a mortality shock event in the reinsured portfolio.
(ii) Morbidity risk
Products such as critical illness, short-term and long-term disability and long term care, which all contain morbidity risk, are
subject to the risk of negative trends in health, as well as to the consequences of improved medical diagnoses capabilities
which increase the number of claims that otherwise would possibly have remained undetected. Medical progress may
enable better treatment resulting in higher claims since certain diseases would have otherwise led to immediate death of
insureds. Products providing cover for medical expenses are in particular subject to the risk of higher than anticipated
frequency rates and inflation of medical costs.
(iii) Longevity risk
Longevity risk refers to the risk of a negative deviation from expected results due to the insured or annuitant living longer
than assumed in the pricing of the insurance cover. This risk exists within annuity and long-term care covers and within
other longevity protection products.
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