SCOR Global Life SE, a subsidiary of SCOR SE, has signed a four-year mortality swap with the leading financial services firm JPMorgan, under the terms of which it will receive up to USD 100 million and EUR 36 million in the event of a significant rise in mortality. The agreement runs from 1 January 2008 to 31 December 2011 and will compensate SCOR notably for a rise in mortality rates due to major pandemics, natural catastrophes or terrorist attacks.

 

The risk swap is indexed against a weighted combination of US and European population mortality, measured over two consecutive calendar years. According to the structure of the arrangement, a payment will be triggered if, at any time during the period covered, the index exceeds 115%. At any index level between the trigger point of 115% and the exhaustion point of 125%, JPMorgan will pay to SCOR a pro-rata amount of the notional swap amount of USD 100 million plus EUR 36 million, so that for example at an index level of 120%, 50% of the total amount becomes payable and at an index level of 130%, the full amount will be paid out. The risk swap is fully collateralized and thus SCOR bears no credit risk exposure.

 

Gilles Meyer, Chief Executive Officer of SCOR Global Life, comments: “Life risks make up a significant portion of SCOR’s composite portfolio. This extreme mortality swap effectively hedges our balance sheet against a potential shock event, in line with our prudent risk tolerance and our focus on predictable returns.” 

 

The mortality risk swap is SCOR’s second successful transfer of peak risks to the capital markets in recent months. In November 2007, SCOR entered into a multi-year property catastrophe (“CAT”) retrocession agreement with Atlas Reinsurance IV Limited (“Atlas IV"), which provides EUR 160 million of additional reinsurance coverage for SCOR and its affiliates. This CAT bond, whose losses are determined through modelling, covers first and subsequent Europe Windstorm or Japan Earthquake events for the risk period from November 30, 2007 to December 31, 2010.