4.4 Legal risk - Scor

elies, to a considerable extent, on the quality of local management in the regions and countries in which it operates. The
success of its operations is dependent, among other things, on its ability to attract and retain highly qualified professional
people on a global scale. Competition for such key people in most countries in which it operates is intense. SCOR’s
ability to attract and retain key people, and in particular directors, experienced managers and investment managers,
fund managers, underwriters and actuaries, is dependent on a number of factors, including prevailing market conditions
and compensation packages offered by companies competing for the same talent. If SCOR is unable to attract or retain
key personnel, this could have a material and adverse effect on its financial condition, results of operations and
business.
The Group believes its modeling, underwriting, price calculation and information technology and application systems are
critical to the operation of its businesses. Moreover, its proprietary technology and applications are an important part of
the Group’s underwriting and claims management processes and are a contributing factor to its competitiveness. It is,
therefore, exposed to a major breakdown in its IT systems, outages, disruptions due to viruses, attacks by hackers and
theft of data. SCOR is also exposed to risks relating to the integration of the underlying data of newly acquired
companies into its operating and financial accounting IT systems.
A major defect or failure in SCOR’s internal controls or IT and application systems could result in a loss of efficiency of
its teams, harm to its reputation, increase in the risk of external fraud, or increased expense or financial loss.
The Group also uses certain licensed systems and data from third parties. It cannot be certain that its technology or
applications owned or licensed will continue to operate as intended, or that they will continue to be compatible with each
other, or that it will have access in the future to these or comparable licensors or service providers.
Some of SCOR’s processes are partly or completely outsourced. Outsourcing can increase operational risk which could
cause a significant impact on its results and/or reputation.
SCOR, as every company, must comply with laws and regulations. Furthermore, as an international Group, it must take
into account international laws and regulations. The level of legal or regulatory requirements depends on the country and
the legal structure of the entity. The risk is that it might not respect the level of required compliance appropriate to each
location and legal structure. Its reputation could be affected.
For direct business, SCOR is subject to the laws, regulations and tax rules governing direct insurance which can create
specific compliance risks (i.e. different from those relating to reinsurance business). Any violation of such laws and
regulations could expose SCOR to legal risks or class actions.
In the case of medical underwriting (including SCOR Telemed, a subsidiary of SCOR Global Life), some information
required from the policyholders may be confidential. SCOR Telemed is a dedicated tele-underwriting company. The
company uses IT software to conduct telephone interviews and has a specialized underwriting system to assess
individual risks. There is a risk regarding compliance with data privacy laws in force in each country.
An operational risk failure, in particular the failure of internal control procedures, could have an adverse impact on the
Group’s 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, C. Principal activities and participants of risk
control” for further information on risk mitigation actions.
4.1.12 SCOR’S RISK MANAGEMENT POLICIES AND PROCEDURES MAY LEAVE IT EXPOSED TO UNIDENTIFIED
OR UNANTICIPATED RISK, WHICH COULD NEGATIVELY AFFECT ITS BUSINESS
Risk management requires, among other things, policies and procedures to record properly and verify a large number of
transactions and events. SCOR’s risk management policies and procedures may not be sufficient. Many of its methods
for managing risk and exposures are based upon the use of observed historical market behavior or statistics based on
historical models. As a result, these methods may not fully predict future exposures, which can be significantly greater
than the historical measures indicate, particularly in unusual markets and environments. Other risk management
methods depend upon the evaluation of information regarding markets, clients, catastrophe occurrence or other matters
that is publicly available or otherwise accessible to SCOR. This information may not always be accurate, complete, upto-date
or properly evaluated. Furthermore, the Group cannot exclude the possibility of exceeding SCOR’s risk tolerance
limits due to an incorrect estimation of its risks and exposures. If its policies and procedures prove to be insufficient, the
business, present and future revenues, net income, cash flows, financial position, and potentially, the price of its
securities could be materially and adversely affected.
See “Appendix B – II. Internal control and risk management procedures, C. Principal activities and participants of risk
control” for further information on risk mitigation actions.
4.1.13 SCOR IS EXPOSED TO RISKS RELATED TO ITS ACQUISITIONS
In recent years, SCOR has completed a number of acquisitions around the world. The Group may make further
acquisitions in the future. Growth by acquisition involves risks that could adversely affect its operating results, including
the substantial amount of management time that may be diverted from operations to pursue and complete acquisitions.
Acquisitions could also result in the incurrence of additional indebtedness, costs, contingent liabilities, and impairment
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