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La gestion du risque chez SCOR - Frieder Knuepling - CRO SCOR Group

SCOR’s risk management system

SCOR’s risk management system is composed of two interconnected parts:
 

  • the risk appetite framework;
  • the Enterprise Risk Management (ERM) framework, consisting of various risk management mechanisms which help to ensure that the risk profile is dynamically optimized, whilst remaining aligned with the risk appetite framework.
Defining risk appetite

As part of its capital management, a (re)insurer’s risk appetite defines the quantity of risk that it wishes to accept to achieve a desired level of profitability. Risk appetite can differ from one (re)insurer to another. Whether a company’s risk appetite is low or high, the management needs to properly understand its consequences. SCOR has a mid-level risk appetite, which is revised every three years. SCOR currently uses a solvency ratio target range and an expected profitability target to provide a complete definition of its risk appetite. Volatility is controlled through diversification and the capital shield strategy. SCOR has had the lowest volatility in the industry since 2005.
 

SCOR’s risk appetite framework is at the heart of its decision making, and is part of its strategic plan, “Vision in Action”. The Group notably relies on specific tools to monitor its risk exposures and compare them against the limits set out in its risk appetite framework:

 

  • the “risk driver” system, which ensures that the Group’s annual aggregate exposure to each major risk category is well managed. The objective is to avoid overconcentration of risk and hence maximize diversification benefits;
  • the “extreme scenario” system, which is designed to avoid the Group’s overexposure to one single event;
  • the “footprint scenarios” provide an impact assessment on the Group under selected deterministic scenarios. SCOR uses either key historical events or other extreme events to assess their impact on an as-if basis on its current portfolio and in-force retrocession / hedging mechanisms. This approach provides an alternative and complementary perspective on the Group’s exposures.
SCOR’s capital shield strategy

A Robust Capital Shield is one of the four cornerstones of SCOR’s strategy. The primary purpose of the Capital Shield Strategy is to ensure that the Group adheres to the risk tolerance limits as defined in the risk appetite framework, so that SCOR’s capital and solvency are protected. The Capital Shield Strategy is based on two concepts:
 

  • the Group’s gross exposure is mitigated through traditional retrocession and other hedging mechanisms (such as capital markets solutions or contingent capital facilities) to achieve an acceptable net risk exposure;
  • through the Solvency buffer (or Capital buffer) and the Group’s dynamic solvency scale, SCOR monitors the amount of capital necessary to respect the Group’s risk/return objectives and safeguard its franchise.
SCOR’s internal model

SCOR has developed a full and holistic internal model over the last 10 years, on the basis of the Group’s experience and expertise. This model covers all material quantifiable risks to which the Group is exposed (Life and P&C underwriting risk, market and credit risk, operational risk) and reflects SCOR’s risk profile and strategy. It is founded on high scientific standards, using systematically stochastic simulations and modelling dependencies across risks, based on cutting-edge methodologies. The internal model simulates the interactions between the assets and liabilities of the Group under various scenarios and determines the capital level necessary to ensure that the Group is solvent with an annual probability of 99.5%.

 

From 1 January 2016 onwards, the regulatory solvency position of the Group is assessed by SCOR’s internal model, which was approved in November 2015 by the Group’s Supervisors. SCOR extensively uses its internal model to help to prepare management decisions involving risk management or solvency considerations, in particular to:

 

  • Define its underwriting plan;
  • Verify its consistency with the risk drivers and risk limits;
  • Help the management to monitor compliance with all the limits that have been set;
  • Support the analysis of strategic decisions, such as M&A or significant investment decisions.
SCOR’s day-to-day capital management

SCOR has developed a solvency scale which drives a process of gradual escalation and management responses, depending on its solvency position based on the internal model. The optimal capital range (defined as a solvency ratio of 185%-220%) enables the Group to achieve the best balance between a strong solvency level and efficient use of capital. Hence SCOR aims to make the best possible use of the numerous options at its disposal to manage and steer its risk and capital positions toward the optimal area.

SCOR’s solvency level is strongly anchored in the “Vision in Action” plan, enabling optimal use of its capital under the Solvency II regime.

  

 

At 30 June 2017, SCOR’s expected solvency ratio stands at 226%, slightly above the optimal solvency range of 185%-220% as defined in the “Vision in action” plan.

 
The optimal range is designed to meet:
 
  • the profitability and solvency objectives of the “Vision in Action” plan
  • the expectations of several stakeholders such as clients, shareholders and regulators

 

THE CRO FORUM’S EMERGING RISK INITIATIVE, LED BY SCOR IN 2016, PUBLISHED A NEW POSITION PAPER ON WATER RISKS
Water risks constitute major challenges – both in terms of threats and opportunities – for society as a whole, and for the re/insurance industry. Yet, they are widely underestimated, disregarded or simply ignored. 
With its new Position Paper on Water Risks published in November 2016, the Emerging Risks Initiative (ERI) of the Chief Risk Officer (CRO) Forum has aimed at synthesizing what water risks represent for the reinsurance industry in terms of scarcity, pollution, health, treatment, conflicts, regulatory and reputational risks.
 
Learn more about Water Risks
 
 
THE CRO FORUM’S 2016 RISK RADAR UPDATE
The CRO Forum is a group of professional risk managers from the (re)insurance industry that focuses on developing and promoting industry best practices in risk management. Made up of Chief Risk Officers from large multinational insurance and reinsurance companies, including SCOR, it aims to represent the members’ views on key risk management topics, including emerging risks. The CRO Forum’s Emerging Risks Initiative has published an updated Risk Radar every year since 2005.This Risk Radar classifies each risk by nature, time horizon and expected impact. In 2016, 3 new risks were added: permafrost thawing, the sharing economy and the shifting geopolitical landscape / war risk.