Identifying and controlling risksSCOR aims to provide attractive long-term returns and a transparent level of earnings volatility for its shareholders, through the careful management of diversified risk portfolios and the capital allocated to the risks they contain. This can be particularly challenging during periods of extreme stress, such as the one we have been experiencing since 2008.
Nevertheless, the Group has been able to demonstrate that it is successfully managing the financial market crisis with no impact on solvency, while still delivering profitability in line with its strategic plans.SCOR’s ERM strategy is built around the Capital Shield policy, which determines the risk appetite of the GroupThe cornerstone of the SCOR group’s ERM Framework is the "Capital Shield" policy. The purpose of the Capital Shield policy is to ensure that the Group reconciles its risk and return objectives, risk objectives being measured in terms of earnings volatility and Group solvency. The policy is based on an economic value approach in order to take into account all potential profits and losses, some of which are not immediately recognisable from an accounting point of view.
The Capital Shield policy is based on two concepts. Firstly, our gross exposure is mitigated through retrocession and other hedging mechanisms to achieve an acceptable net risk exposure. Secondly, through the device of Buffer Capital, SCOR calibrates the amount of target capital necessary to respect the Group’s riskreturn objectives.
SCOR’s Board and Executive Management team regularly review the Group’s Risk Profile to ensure that it remains aligned with the Group’s Risk Appetite. SCOR uses various mechanisms within its comprehensive ERM Framework to manage the Group's Risk Profile. These mechanisms enable SCOR to identify, assess, control and monitor specific risks in order to:
- take mitigating action to reduce the Group’s retained exposure to specific risks and to ensure that the Risk Tolerance limits defined above are not breached,
- take optimising action to capitalise on the risk-return ratio.
SCOR’s Enterprise Risk Management policy is rated favourably by the rating agenciesThe stability of SCOR’s results confirms the success of our strategic risk management, which was recognised in September 2009 by Standard & Poor's when they upgraded SCOR’s Enterprise Risk Management (ERM) rating from "adequate" to "strong". According to Standard & Poor’s, the ERM rating upgrade reflects the Group’s excellent risk management culture, excellent emerging risk management, strong strategic risk management and strong or at least adequate risk controls for the Group’s major risks. The rating agency further noted that SCOR’s risk appetite, product and investment mix and financial targets should produce strong earnings, with lower volatility than many of its peers in the reinsurance sector. The ERM upgrade by S&P is a further testimony to the extensive efforts that the Group has made at all levels, and will enhance the Group’s strong franchise even further.
For more information about SCOR's ERM strategy, please read the following documents:
- Presentation at the Investor's Day 2015: SCOR is fully ready for Solvency II
- Registration Document (DDR) 2013, chapter 4, pages 19-43