4.4 Legal risk - Scor

• generate fee income and market-related revenue to meet liquidity needs;
• access the capital necessary to grow its business.
As such, SCOR may be forced to delay raising capital, issue shorter term securities than it prefers, or bear an
unattractive cost of capital which could decrease its profitability and significantly reduce its financial flexibility. The
group’s results of operations, financial condition, cash flows and statutory capital position could be materially adversely
affected by disruptions in the financial markets.
4.4 Legal risk
4.4.1 SCOR IS EXPOSED TO RISKS RELATED TO LEGISLATIVE AND REGULATORY CHANGES AND
POLITICAL, LEGISLATIVE, REGULATORY OR PROFESSIONAL INITIATIVES CONCERNING THE INSURANCE
AND REINSURANCE SECTOR, WHICH COULD HAVE ADVERSE CONSEQUENCES FOR ITS BUSINESS AND ITS
SECTOR
The operations of the Group and its subsidiaries are subject to regulatory requirements within the jurisdictions where
they operate. Such regulations not only prescribe the approval and monitoring of activities, but also impose certain
restrictive provisions (e.g., statutory capital adequacy) to meet unforeseen liabilities as these arise, in order to minimize
the risk of default and insolvency.
As at this date, SCOR is subject to comprehensive and detailed regulations and to the supervision of the insurance and
reinsurance regulatory authorities in all countries in which it operates. Changes in existing laws and regulations may
affect the way in which it conduct its business and the products it may offer or the amount of reserves to be posted,
including on claims already declared. Insurance and reinsurance supervisory authorities have broad administrative
power over many aspects of the reinsurance industry and SCOR cannot predict the timing or form of any future
regulatory initiatives. Furthermore, these authorities are concerned primarily with the protection of policyholders and
policy beneficiaries, rather than shareholders or creditors. The diversity of the regulations to which the Group is subject
has been substantially reduced by the implementation into French law of Directive n. 2005/68/EC (the “2005 Directive”)
dated 16 November 2005, by ordinance n. 2008-556 of 13 June 2008 and application decrees n. 2008-711 of
17 July 2008 and n. 2008-1154 of 7 November 2008, as well as a regulation (arrêté) of 7 November 2008. The 2005
Directive prescribes the application of a “single passport” and confers the supervision of EU reinsurance companies
upon the supervisory authorities of the headquarters of the company. This should simplify and clarify the supervisory
conditions applicable to the Group, in the EU at least. Moreover the 2005 Directive, implemented into national law,
establishes regulations relating to reserves and to the Life and Non-Life solvency margins applicable to the Group as at
2008 in France and in all European countries. The 2005 Directive defines minimal conditions common to all member
States of the European Union, and gives national legislators the option to set more stringent requirements. The national
provisions adopted for the implementation of this Directive and their interpretations, as well as other legislative or
regulatory changes, increase the harmonization of regulations governing reinsurers with the regulations governing
insurers. These new regulations may increase solvency margin obligations, thereby restricting SCOR’s underwriting
capacity.
The reinsurance sector has been exposed in the past –and may be in the future – to involvement in legal proceedings,
regulatory inquiries and actions by various administrative and regulatory authorities, as well as to regulation concerning
certain practices used in the insurance sector. This involvement notably concerned agreements over the payment of
“contingency commissions” by insurance companies to their agents or brokers and the consequences of such payments
on competition between insurance operators, as well as the accounting of various alternative risk transfer products.
In addition to this, the public authorities in the U.S. and the rest of the world are closely examining the potential risks
presented by the reinsurance sector as a whole, as well as their consequences on commercial and financial systems in
general.
Adverse changes in laws or regulations or an adverse outcome of these proceedings could have adverse effects on
SCOR’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.
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