Sustainable Value Creation
Like many organizations, SCOR uses a range of resources to create value in the short, medium and long term, both for its shareholders and for Society as a whole.
There are many different forms of capital (e.g. financial, human, intellectual, social), impacting us in different ways.
Basically, all forms of capital are important to our activities, because:
- we protect these sources of capital through our risk taking activity, and
- we rely on their availability to develop profitable business.
As a global reinsurer operating across five continents, SCOR carries highly diversified risks in more than 160 countries. SCOR is actively expanding its footprint in numerous geographies and lines of business, including mortality and morbidity, health, longevity, natural and technological catastrophes, liability, accidents, credit risk, agricultural risk, aviation and spatial risk. Risk is the raw material of SCOR’s business.
The risk universe to which the various forms of capital are exposed is changing and expanding rapidly. As a reinsurer, SCOR enables resilience by providing effective protection solutions to its clients and by investing in global economies, which in turn creates tangible benefits for Society:
To effectively conduct our operations, we use all forms of capital available to varying degrees. Although financial capital and human capital are the most important resources in terms of the sustainability of our activities, we also rely on other resources such as intellectual capital, social and relationship capital, and to a lesser extent (although still important) manufactured and environmental capital.
Our business model, our environment
and our stakeholders
The reinsurance industry has a specific feature that it does not share with other economic sectors, which tend to be marked by cycles and trends: our industry is structurally exposed to shocks. Large risks and catastrophes, which make up the raw material of reinsurance, are shocks with varying origins, sizes and consequences affecting economies and populations.
The inverse nature of our production cycle is another specific feature of the reinsurance business model: the selling price of reinsurance products and services is settled before their actual cost is precisely known. Reinsurers charge premiums in exchange for protecting their clients from the negative shocks stemming from peak risks. These premiums are invested in the economy to generate returns, and then clients’ losses are compensated when risks occur.
In this context, we create diversified risk portfolios in order to minimize correlation between risks. This is achieved through the aggregation of large risks that, as a reinsurer, SCOR mutualizes by business line and by geographical area. Our Group thus builds a portfolio with a relatively regular and predictable risk profile, and SCOR limits its exposure by transferring part of these risks through retrocession and Insurance-linked securities.
Ensuring that our Group delivers on its promises to alleviate the negative consequences of risks requires a robust risk management system, strong modeling capabilities in order to assess, quantify and actively manage risks (e.g. risk pooling and hedging), and a skilled workforce able to combine theoretical and analytical considerations with empirical and instinctive considerations.
It is thus important to ensure that we, as an organization, are in sync with our environment and open to the outside world, in order to detect and adapt to any changes in the risk universe. Being attuned to everything and reacting in an informed and responsible way is a prerequisite to long-term relevance. In this respect, SCOR aims to be a trusted partner and a market leader.
Our Group is actively engaged in furthering the recognition of our industry, and equally engaged in addressing the challenges of Society by contributing solutions to the problems posed. Over the years, SCOR has systematically implemented cutting-edge risk management processes while nurturing an open and direct dialogue with our main stakeholders, notably our shareholders, our clients, our employees, our supervisory authorities and the academic world.
Business model and financial and non-financial value creation
Mega-Trends
Our world is intrinsically stochastic. SCOR is very mindful of the rapidly changing and expanding risk universe in which the Group operates:
- While traditional risks remain, new risks are developing and emerging alongside innovation, technological breakthroughs and the development of human activity. Moreover, increasingly complex interdependencies are appearing between risks.
- The expansion of the risk universe is speeding up, particularly with the acceleration of scientific and technological progress.
Anticipating the many risks to which our organization, our clients and Society are exposed, and seizing the opportunities that stem from an evolving risk landscape, are concepts firmly anchored in SCOR’s culture.
Digitization
Trends
Innovation in the digital area is disruptive in many respects. Full of promises, digitization will bring tangible benefits in many areas (e.g. wearables could encourage healthier lifestyle, technology may also help to narrow the protection gap). But digitization creates new risks for Society as well as increasing expectations in terms of security and data privacy. The 4th industrial revolution prompted by digitization comes with breakthroughs in various areas such as automation, autonomous mobility, artificial intelligence, augmented reality and robotics, but also brings a shift of skills that needs to be anticipated by Society. This increasing digital interconnection between human being, things (balloons, satellites, drones, etc.) and organizations exacerbates the risk of interdependencies that could stem from cyber attacks or a severe power blackout.
Response
16 ongoing digitization initiatives launched in various areas (e.g. big data and advanced analytics, e-exchange and blockchain, robotics and automation, artificial intelligence)
Ensuring compliance with the General Data Protection Regulation through a dedicated Group project
Joining platforms and conferences to connect to the Insurtech world (e.g. InsurLab in Germany)
Designing reinsurance products addressing cyber risk
Training the Group’s staff on digital tools, coding, etc.
Promoting cyber-related risk management (e.g. CRO Forum)
Harnessing technology to narrow the insurance protection gap (e.g. Wechat) and increasing engagement as well as encouraging healthier lifestyles (e.g. Umanlife).
Changing demographics and evolving health trends
Trends
The planet’s population is undergoing what specialists are calling a demographic explosion, and at the same time health trends affecting the population are continuously evolving. Growing and ageing populations, urbanization, mass migration, the rise of chronic diseases, obesity, and medication overuse could have harmful consequences for Society. Simultaneously, medical research is being carried out on an increasing number of subjects, with the promise of various breakthroughs in the next few decades.
Response
Supporting the life science industry through the Group’s investment activities (e.g. € 160 m. invested in life science-related companies, mainly biotech, at the end of 2017)
Fostering actuarial and medical research on a wide range of biometric risks through partnerships with top academics, either directly or through the Group’s Foundation:
- 2 focused projects on the modeling of life expectancy at older ages in partnership with the National Institute of Demographic studies (France) and the University of South Denmark
- Financial support for the Human Mortality Database project
- Partnership with several foundations in the field of Alzheimer’s disease (IFRAD) and cardiovascular diseases (Assmann)
- Research on long-term care in partnership with Inserm and HIV with the Pierre et Marie Curie University
Expanding the boundaries of insurability and supporting healthy lifestyles, e.g.:
- Helping cancer survivors to access insurance: the SCOR Underwriting Cancer Project
- Developing a digital offer for diabetes management (e.g. Hong-Kong)
- Partnering with “healthTech” (e.g. Umanlife, Vivametrica)
Harnessing the Group’s R&D centers: 7 R&D centers providing analyses and risk projections that are used by SCOR’s teams to advise the Group’s clients on the implementation and monitoring of their life and health insurance products.
Supporting stronger regulation around tobacco control and divesting from this industry.
Global ClimateChange
Trends
Weather is becoming more unpredictable across the globe as natural climate variability is influenced by climate change. Climate Change is a complex risk with extensive ramifications (e.g. increase of extreme weather events, climate-induced poverty, mass-migration). Climate change entails a wide range of risks categorized as physical, transition and liability risks. Society expects corporations to actively play a role both in mitigating climate change and adapting to its consequences, and expects transparency on climate-related disclosures.
Response
Developing the Group’s underwriting capacities in the area of low-carbon energy, agriculture, and natural catastrophes so as to play a role both in mitigating climate change and adapting to its consequences.
Supporting the transition to a low-carbon economy through investments in energy efficient buildings and renewable energies (€ 1.2 bn. invested at the end of 2017).
Designing financial products that may be used as an adaptation tool (e.g. Insurance Linked Securities: € 986 m. at the end of 2017).
Promoting Climate-related risk management research through partnerships with a wide range of stakeholders (e.g. Climate KIC, OASIS, SCOR Corporate Foundation for Science, Geneva Association – Extreme Events & Climate Risk working group, Insurance Development Forum).
Enforcing sectoral guidelines both on the liability and the asset side of the Group’s balance sheet (e.g. divestment from companies deriving more than 30% of their turnover from thermal coal, ban on certain coal-related activities and implementation of a scoring grid to help underwriters evaluate Environmental, Social and Governance practices of thermal coal-intensive businesses).
Managing the Group’s carbon footprint through the reduction of the Group’s carbon intensity (-15%/employee by 2020) and the implementation of a carbon offset program.
Advocating for the seamless implementation of the Paris agreement (e.g. the “Decarbonize Europe Manifesto”, the “global investor letter” urging governments of the G20 to fully support and implement the Paris agreement).
Furthering climate change-related risk management techniques on the asset side (e.g. analyzing the alignment of the Group’s portfolio with the 2°Celsius scenario, assessing the Group’s portfolio carbon footprint).
Fostering climate risk-related disclosures through active participation in various forums (e.g. leading several working groups at the French insurance association, sharing the Group’s approach with the industry through active participation in several different conferences).