4.4 Legal risk - Scor

4.4.6 SCOR IS EXPOSED TO RISKS LINKED WITH SOLVENCY II IMPLEMENTATION
The “Solvency II” European Directive, no. 2009/138/EC of 25 November 2009, related to the solvency standards
applicable to insurers and reinsurers ("Solvency II Directive"), lays down, at the level of individual companies and at the
level of groups, the minimum amounts of financial resources that insurers and reinsurers operating in the European
Economic Area will be required to have in order to cover the risks to which they are exposed and the principles that
should guide insurers' and reinsurers' overall risk management and reporting..
The new regime represents a significant change in the basis for regulating insurance and reinsurance business in
Europe. SCOR has to review its regulatory capital structures and implement the systems, processes and cultural
changes necessary to meet the new requirements.
Although it is of course not possible to quantify the impact of these requirements, nor their scope, it is very likely that risk
management and control measures will be reinforced for reinsurers in the near future, which may in turn result in an
increase in regulatory capital requirements (or a reduction in the underwriting capacity) and increase their operating
costs. 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.
The official date of application according to the latest texts published in the Official Journal of the European Union is 1
January 2014, but there could be further delays. The legislative process setting down the final versions of the Solvency II
regime is still ongoing. The published Solvency II Directive will be amended by the Omnibus II Directive which is still
being negotiated between European co-legislators. When this is concluded, the European Commission will have to
adopt Level 2 delegated acts and the European Insurance and Occupational Pensions Authority (EIOPA) will be in a
position to consult on technical standards that are necessary to make the Solvency II regime effective. Delays in the
application of Solvency II may increase the costs of implementation. Inversely, a fast implementation of certain aspects
of the new regime could also take place, with a yet another risk of increased cost for SCOR. 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.
4.4.7 SCOR IS EXPOSED TO CERTAIN LITIGATION MATTERS
SCOR is involved in legal and arbitration proceedings in certain jurisdictions, particularly in Europe and in the U.S. For
more information on this issue, refer to “Section 20.1.6 – Notes to the financial statements, Note 27 - Litigation.”
An unfavourable outcome in one or more of the court or arbitration proceedings described above 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.
4.4.8 SCOR’S TAX POSITIONS ARE SUBJECT TO AUDIT AND APPROVAL BY TAX AUTHORITIES
SCOR operates in numerous tax jurisdictions around the world. Tax risk is the risk associated with changes in tax law or
in the interpretation of tax law. Additionally, tax laws and regulations may change with retroactive impact. Tax risk also
includes the risk of changes in tax rates and the risk of failure to comply with procedures required by tax authorities.
Failure to manage tax risks could lead to an additional tax charge. It could also lead to a financial penalty for failure to
comply with required tax procedures or other aspects of tax law. If, as a result of a particular tax risk materializing, the
tax costs associated with particular transactions are greater than anticipated, it could affect the profitability of those
transactions.
There are also specific rules governing the taxation of policyholders. SCOR will be unable to accurately predict the
impact of future changes in tax law on the taxation of life insurance in the hands of policyholders. Amendments to
existing legislation (particularly if there is the withdrawal of any tax relief or an increase in tax rates) or the introduction of
new rules may affect the future long term business and the decisions of policyholders. The impact of such changes upon
the Group might depend on the mix of business in force at the time of such change and could have a material adverse
effect on its business, results of operations and/or financial condition.
The design of life insurance products by SCOR’s life insurance companies takes into account a number of factors,
including risks, benefits, charges, expenses, investment returns (including bonuses) and taxation. The design of long
term insurance products is based on the tax legislation in force at that time. Changes in tax legislation or in the
interpretation of tax legislation may therefore, when applied to such products, have a material adverse effect on the
financial condition of the relevant long term business fund of the entity in which the business was written 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.
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