Satellite Risk & Insurance

Dubai 1-3 March 2010

An Underwriter’s Perspective

Didier ParsoireChief Underwriting Officer, Space

SCOR Global P&C

Space Insurance: A Volatile MarketMarket Loss Ratio

0%

50%

100%

150%

200%

250%

Source: SCOR

Dubai 1-3 March 2010

• Volatility due to:• Small population of risks

• High claim severity

• Cyclical market volume and price

• Capital is the measure of volatility

0%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Introducing Capital Allocation

• Capital requirement under Solvency II rules: • To cover all risks an insurer faces (insurance, market, credit and

operational risk)

• Calculated as Insurer’s expected loss with a 99.5% confidence level

over a one year time horizon

Dubai 1-3 March 2010

• Target ROE drives profitability requirement

• A need to model extreme eventsTarget Premium

Average

Cla

im

Int.

Exp

enses

Ext. E

xpense

sTarg

et RO

E

Extreme Events for Satellites

• Correlation of risks in time and space• Solar flares, In-orbit collisions, Leonids, Generic Defects…

• Focus on generic defects• A substantial part of

market claims

80%

100%

Non-generic Claims

Generic Claims

Dubai 1-3 March 2010

market claims

• Design/Manufacturing/Testing:

From minor deviations to

major technological steps

• How to build a model capturing both individual &

serial risks ?

0%

20%

40%

60%

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

Source: SCOR

Satellite Risk Model (individual risks)

• Severity model• Based on observed loss quantum

• Fitting MBBEFD curves (Post-separation & In-orbit risks)

Dubai 1-3 March 2010

• Frequency model• Poisson distribution fit to observed numbers

Source: SCOR Source: SCOR

Satellite Risk Model(Generic Defects)

• Based on Event scenarios

• Several Event types considered• Gradual loss (e.g. solar cell or TWTA failures)

• Severe loss (e.g. SADA or certain propulsion failures)

• Total loss (e.g. computer or power bus total failures)

Dubai 1-3 March 2010

• Total loss (e.g. computer or power bus total failures)

• The “Big One” (e.g. … a big one)

• For each type, scenario is based on Return period,

Number of affected satellites, Severity

Portfolio Loss Distribution

• Set a reference portfolio• Number of satellites per phase of risk (Post-sep., In-orbit)

• Distribution of values

• Type of coverage (proportional / non-proportional)

• Average premium rate per phase

Dubai 1-3 March 2010

• Average premium rate per phase

• Generate losses according to stochastic model (per

risk and per event)

Results: Claims, Capital & Premium

Case 2 (Base 100 = Case 1)

140 Average Claim

High sensitivity to

Frequency & Severity

Correlation

Loss distribution with Generic Defects (frequency correlation)

90,0%

100,0%

1

Loss distribution w/o Generic defects

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

Loss

Pro

ba

bil

ity

Average Claim Amount

Claim (VaR @ 99.5%)

Risk-based Capital

(Stand-alone)

Source: SCOR

Dubai 1-3 March 2010

140

151

192

amount

Risk-based

Capital

Target Premium

Case 3 (Base 100 = Case 1)

140

268

172

Average Claim

amount

Risk-based

Capital

Target Premium

Lo s s d is tr ib u tio n w ith G e n e r ic D e fe cts (fr e q u e n cy & Se ve r ity co r r e la tio n )

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

90,0%

100,0%

Lo s s

pro

ba

bil

ity

3+40% vs. case 2

Source: SCOR

2

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

70,0%

80,0%

Loss

Pro

ba

bil

ity

+40%+92% vs. case 1

Source: SCOR

Summary

• Solvency rules & strong ERM call for adequate capital

allocation among various insurance lines, which in

turn drives profitability

• Allocating capital to Space Insurance requires strong

knowledge of the past and a prospective view on risk

Dubai 1-3 March 2010

knowledge of the past and a prospective view on risk

• Working with Satellite manufacturers and Satellite

operators is key to refine/update Satellite risk model

• Proper capital assessment is also a concern for our

clients who are retaining a substantial part of the risk

Thank you.

Dubai 1-3 March 2010

Didier Parsoire CVWork Experience

2007 to present

SCOR Global P&C

Chief Underwriting Officer, Space specialty line & Alternative

Risk Financing

2000 – 2007

SCOR

Senior Vice President – Head of Space department. Head of

Technology, Finance & Service Corporate Risks underwriting

1992 – 2000

SCOR

Space Underwriter & Head of Space department

Dubai 1-3 March 2010

SCOR

1986 – 1992

MATRA (now Astrium)

Space Engineer - Satellite Design & Ground system integration

Education

1982 – 1985 Graduated Engineer from « Ecole Nationale Supérieure de

l’Aéronautique et de l’Espace » (Supaero) in Toulouse, France

2001 Young Managers Programme - INSEAD business school

Introduction

SCOR is the 5th largest Reinsurer in the world. The group benefits from a

strong global franchise with 51 offices across 5 continents and over 3500

clients. As a multi-line risk carrier, SCOR business strategy is based on a twin-

engine approach :

is dedicated to life reinsurance for individual and group life insurance, long-

term care, substandard risks, critical illness (in United Kingdom and Asia) and financing products.

Dubai 1-3 March 2010

term care, substandard risks, critical illness (in United Kingdom and Asia) and financing products.

is committed to reinsurance as its core business and worldwide presence,

based on two strong balanced business areas: Treaty P&C and Specialty Lines

Space is one of our core specialty lines. SCOR was among the pioneers who

responded to the dedicated needs of the Space industry. Through its

continuous presence over the past 25 years, SCOR has built a leading position

in the Space market.

www.scor.com

In 2010, SCOR celebrates its 40th

birthday