4.4 Legal risk - Scor

4.4.2 INCONSISTENT APPLICATION OF EU DIRECTIVES BY REGULATORS IN DIFFERENT EU MEMBER STATES
MAY PLACE SCOR’S BUSINESS AT A COMPETITIVE DISADVANTAGE TO OTHER EUROPEAN FINANCIAL
SERVICES GROUPS
Insurance regulation in France is largely based on the requirements of EU Directives. Inconsistent application of
directives by regulators in different EU member states may place SCOR’s business at a competitive disadvantage to
other European financial services groups. In addition, changes in the local regulatory regimes of designated territories
could affect the calculation of its solvency position and 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.
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.
4.4.3 CHANGES IN CURRENT ACCOUNTING PRACTICES AND FUTURE PRONOUNCEMENTS MAY MATERIALLY
IMPACT SCOR’S REPORTED FINANCIAL RESULTS
Unanticipated developments in accounting practices may require SCOR to incur considerable additional expenses to
comply with such developments, particularly if it is required to prepare information relating to prior periods for
comparative purposes or to apply the new requirements retroactively. The impact of potential changes in accounting
practices cannot be predicted but may affect the calculation of net income, net equity and other relevant financial
statement line items and the timing of when impairments and other charges are tested or taken. In particular, recent
guidance and ongoing projects put in place by standard setters globally have indicated a possible move away from the
current insurance accounting models toward more “fair value” based models which could introduce significant volatility in
the earnings of insurance industry participants. This 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.
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.
4.4.4 IN 2010, THE U.S. CONGRESS ENACTED THE DODD FRANK WALL STREET REFORM AND CONSUMER
PROTECTION ACT (“DODD-FRANK ACT”), WHICH COULD HAVE AN ADVERSE IMPACT ON SCOR’S BUSINESS
On 21 July 2010, the Dodd-Frank Act was enacted and signed into law. The Dodd-Frank Act effects sweeping changes
to financial services regulation in the U.S. The Dodd-Frank Act establishes the Financial Services Oversight Council
(“FSOC”), which is authorized to recommend that certain systemically significant non-bank financial companies,
including insurance companies, be regulated by the Board of Governors of the Federal Reserve. The Dodd-Frank Act
also establishes a Federal Insurance Office (“FIO”) within the Department of Treasury. While not having a general
supervisory or regulatory authority over the business of insurance the director of this office will perform various functions
with respect to insurance, including serving as a non-voting member of the FSOC and making recommendations to the
Council regarding insurers to be designated for more stringent regulation. The Dodd-Frank Act also authorizes the
federal preemption of certain state insurance laws in limited instances. The FSOC and FIO are authorized to study,
monitor and report to Congress on the U.S. insurance industry and the significance of global reinsurance to the
U.S. insurance market, which could result in additional legislative or regulatory action.
The requirements of the regulations ultimately adopted under the Dodd-Frank Act, the effect such regulations will have
on the U.S. insurance market and the additional costs of compliance with such regulations is not clear. However,
SCOR’s business could be materially and possibly adversely affected by changes to the U.S. system of insurance
regulation or its designation or the designation of insurers or reinsurers with which it does business as systemically
significant non-bank financial companies. This 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.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.
4.4.5 CAPITAL AND LIQUIDITY MAY NOT BE COMPLETELY FUNGIBLE BETWEEN DIFFERENT REGULATED
LEGAL ENTITIES, WHICH MAY HAVE NEGATIVE CONSEQUENCES FOR THE LEGAL ENTITIES.
SCOR’s regulated legal entities must satisfy local regulatory capital requirements and must have sufficient liquidity to
pay claims and expenses. In certain circumstances, and depending on local regulations, it may be difficult to transfer
capital or liquidity to a legal entity which could have negative consequences for the legal entity concerned and 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.
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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