4.4 Legal risk - Scor
4.4 Legal risk - Scor
4.4 Legal risk - Scor
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<strong>4.4</strong>.2 INCONSISTENT APPLICATION OF EU DIRECTIVES BY REGULATORS IN DIFFERENT EU MEMBER STATES<br />
MAY PLACE SCOR’S BUSINESS AT A COMPETITIVE DISADVANTAGE TO OTHER EUROPEAN FINANCIAL<br />
SERVICES GROUPS<br />
Insurance regulation in France is largely based on the requirements of EU Directives. Inconsistent application of<br />
directives by regulators in different EU member states may place SCOR’s business at a competitive disadvantage to<br />
other European financial services groups. In addition, changes in the local regulatory regimes of designated territories<br />
could affect the calculation of its solvency position and have a material adverse impact on SCOR’s business, present<br />
and future revenues, net income, cash flows, financial position, and potentially, on the price of its securities.<br />
See “Appendix B – II. Internal control and <strong>risk</strong> management procedures, C. Principal activities and participants of <strong>risk</strong><br />
control” for further information on <strong>risk</strong> mitigation actions.<br />
<strong>4.4</strong>.3 CHANGES IN CURRENT ACCOUNTING PRACTICES AND FUTURE PRONOUNCEMENTS MAY MATERIALLY<br />
IMPACT SCOR’S REPORTED FINANCIAL RESULTS<br />
Unanticipated developments in accounting practices may require SCOR to incur considerable additional expenses to<br />
comply with such developments, particularly if it is required to prepare information relating to prior periods for<br />
comparative purposes or to apply the new requirements retroactively. The impact of potential changes in accounting<br />
practices cannot be predicted but may affect the calculation of net income, net equity and other relevant financial<br />
statement line items and the timing of when impairments and other charges are tested or taken. In particular, recent<br />
guidance and ongoing projects put in place by standard setters globally have indicated a possible move away from the<br />
current insurance accounting models toward more “fair value” based models which could introduce significant volatility in<br />
the earnings of insurance industry participants. This could have a material adverse impact on SCOR’s business, present<br />
and future revenues, net income, cash flows, financial position, and potentially, on the price of its securities.<br />
See “Appendix B – II. Internal control and <strong>risk</strong> management procedures, C. Principal activities and participants of <strong>risk</strong><br />
control” for further information on <strong>risk</strong> mitigation actions.<br />
<strong>4.4</strong>.4 IN 2010, THE U.S. CONGRESS ENACTED THE DODD FRANK WALL STREET REFORM AND CONSUMER<br />
PROTECTION ACT (“DODD-FRANK ACT”), WHICH COULD HAVE AN ADVERSE IMPACT ON SCOR’S BUSINESS<br />
On 21 July 2010, the Dodd-Frank Act was enacted and signed into law. The Dodd-Frank Act effects sweeping changes<br />
to financial services regulation in the U.S. The Dodd-Frank Act establishes the Financial Services Oversight Council<br />
(“FSOC”), which is authorized to recommend that certain systemically significant non-bank financial companies,<br />
including insurance companies, be regulated by the Board of Governors of the Federal Reserve. The Dodd-Frank Act<br />
also establishes a Federal Insurance Office (“FIO”) within the Department of Treasury. While not having a general<br />
supervisory or regulatory authority over the business of insurance the director of this office will perform various functions<br />
with respect to insurance, including serving as a non-voting member of the FSOC and making recommendations to the<br />
Council regarding insurers to be designated for more stringent regulation. The Dodd-Frank Act also authorizes the<br />
federal preemption of certain state insurance laws in limited instances. The FSOC and FIO are authorized to study,<br />
monitor and report to Congress on the U.S. insurance industry and the significance of global reinsurance to the<br />
U.S. insurance market, which could result in additional legislative or regulatory action.<br />
The requirements of the regulations ultimately adopted under the Dodd-Frank Act, the effect such regulations will have<br />
on the U.S. insurance market and the additional costs of compliance with such regulations is not clear. However,<br />
SCOR’s business could be materially and possibly adversely affected by changes to the U.S. system of insurance<br />
regulation or its designation or the designation of insurers or reinsurers with which it does business as systemically<br />
significant non-bank financial companies. This could have a material adverse impact on SCOR’s business, present and<br />
future revenues, net income, cash flows, financial position, and potentially, on the price of its securities.See “Appendix B<br />
– II. Internal control and <strong>risk</strong> management procedures, C. Principal activities and participants of <strong>risk</strong> control” for further<br />
information on <strong>risk</strong> mitigation actions.<br />
<strong>4.4</strong>.5 CAPITAL AND LIQUIDITY MAY NOT BE COMPLETELY FUNGIBLE BETWEEN DIFFERENT REGULATED<br />
LEGAL ENTITIES, WHICH MAY HAVE NEGATIVE CONSEQUENCES FOR THE LEGAL ENTITIES.<br />
SCOR’s regulated legal entities must satisfy local regulatory capital requirements and must have sufficient liquidity to<br />
pay claims and expenses. In certain circumstances, and depending on local regulations, it may be difficult to transfer<br />
capital or liquidity to a legal entity which could have negative consequences for the legal entity concerned and have a<br />
material adverse impact on SCOR’s business, present and future revenues, net income, cash flows, financial position,<br />
and potentially, on the price of its securities.<br />
See “Appendix B – II. Internal control and <strong>risk</strong> management procedures, C. Principal activities and participants of <strong>risk</strong><br />
control” for further information on <strong>risk</strong> mitigation actions.<br />
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