4.4 Legal risk - Scor

F. Deposits with custodians
As part of the management of its investment portfolio, SCOR deposits the securities it owns with a number of approved
custodians. In the case of default of a custodian, depending on the local regulation applicable to the custodian, all or part
of these securities could become blocked.
The risk of losing all or part of securities the Group owns could have a material adverse impact on its business, present
and future revenues, net income, cash flows, financial position, and potentially, on the price of its securities.
G. Credit & Surety
SCOR is exposed to credit risk through its Credit & Surety portfolio. By reinsuring the liabilities of its clients, which are
insurers providing surety bonds and/or credit insurance policies, the Group must indemnify its ceding companies, for the
portion that it reinsures, in the event of the default of companies on which its ceding companies are exposed.
This business is situated in many countries, and across a diverse range of risks, cedants and activity sectors.
Multiple defaults of companies (or in the event of the default of a major company) on which the ceding companies are
exposed could have a material adverse impact on SCOR’s business, present and future revenues, net income, cash
flows, financial position, and potentially, on the price of its securities.
H. Future profits of Life reinsurance treaties
Credit risk on future profits from Life reinsurance policies arises from two risk factors.
First of all, the payment of future profits expected under Life reinsurance contracts necessarily implies that the cedant is
solvent: for this reason, SCOR risks a reduction in the value of its portfolio of Life contracts in the event of a deterioration
in the financial strength of the cedant. In such a case, it is possible that the VOBA and deferred acquisition costs (“DAC”)
may as a consequence need to be written down and as a consequence, its shareholders’ equity would be reduced
accordingly.
In particular this affects the US book of business acquired in the course of the Transamerica Re acquisition. The majority
of the former Transamerica Re's reinsurance contracts flow into SCOR via retrocession from Aegon companies. An
AEGON insolvency might lead to premiums from clients no longer being passed on to SCOR, and thus potentially impair
the value of business acquired (“VOBA”).Secondly, a reduction in the value of future profits could arise from a massive
unexpected lapsation of policies following a deterioration of the cedant’s financial rating or an event which has a
negative effect on SCOR’s image.
The Group, therefore, has exposure to a credit risk linked to the insolvency and to the image of its cedants, which, if this
were to occur, could have an adverse impact upon its business, present and future revenues, net income, cash flows,
financial position, and potentially, on the price of its securities
For further details on the impact of the assessment of intangible assets upon SCOR’s results, see “Section 4.2.5 – The
valuation of SCOR’s intangible assets and deferred tax assets may significantly affect its shareholders’ equity and the
price of its securities” and “Section 20.1.6 – Notes to the financial statements, Note 4 – Intangible Assets.”
I. Default of pool members
SCOR participates, for certain risk categories that are material (particularly terrorist risks), in various groups of insurers
and reinsurers (“pools”) aimed at pooling the relevant risks among the members of each group. In the event of a total or
partial default by one of the members of a group, it could be required to assume, in the event of joint liability of the
members, all or part of the liabilities of the defaulting member. In such a case, its business, present and future revenues,
net income, cash flows, financial position, and potentially, the price of its securities could be adversely impacted.
For further details, refer to “Section 4.1.3 – SCOR could be subject to losses as a result of its exposure to terrorism.”
J. Risk of accumulation of the above risks
The aforementioned risks could accumulate in either a single counterparty, in the same sector of activity or the same
country.
See “Section 20 – Note 26, Insurance and financial risk – Credit risk” for further information on risk mitigation actions.
4.1.15 SCOR IS EXPOSED TO THE RISK OF NO LONGER BEING ABLE TO RETROCEDE LIABILITIES ON
ECONOMICALLY VIABLE TERMS AND CONDITIONS
Some capacities SCOR offers are not achievable solely with its current available capital. These capacities (mainly
catastrophic and large risks) rely on retrocession whereby it purchases, mainly on a one-year basis, additional resources
(retrocession) that allows the Group to provide capacity to its clients. SCOR tries to reduce its dependence vis-à-vis the
traditional reinsurance market by entering into alternative risk transfer solutions (e.g. the multi-year securitization of
catastrophic risk in the form of Insurance-Linked Securities ("ILS") and mortality swaps and the issuance of contingent
capital securities). For more information on SCOR’s securitization of catastrophic risk and issuance of contingent capital
securities, see “Section 6 – Business Overview, 6.1.4 Capital shield policy”. Nevertheless, SCOR is exposed to the risk
that it may not be able to retrocede liabilities on economically viable terms and conditions.
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