Life Catastrophe Risk

Overview

This calculator implements the gross capital requirement for the Life Catastrophe Risk sub-module within the Solvency II standard formula.^[1] The Life Catastrophe Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from an extreme, low-frequency 1-in-200 year tail event affecting life obligations.^[2]

Input Terms

• Basic Own Funds (Pre-Stress): The undertaking's basic own funds before the application of the catastrophe shock.
• Scenario Shock (Assets/Liabilities): The instantaneous change in the value of assets and technical provisions resulting from the prescribed 0.15% (1.5 per mille) increase in absolute mortality rates.^[1]
• LAC TP / LAC DT (Scenario-Specific): The reduction in the gross scenario loss provided by the loss-absorbing capacity of technical provisions and deferred taxes.

Technical Rationale

The Life Catastrophe Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. Unlike the permanent Mortality Risk shock, catastrophe risk captures the impact of a sudden, temporary, and extreme event (e.g., a pandemic or major localized disaster) that occurs in the following 12-month period.^[1]

The calculation follows a stressed-own-funds approach, measuring the capital requirement as the reduction in net asset value (NAV) after adding an absolute 0.15 percentage points to the expected mortality rates for the first projection year. This method ensures that the requirement reflects the real economic loss after claims, reserves, and potential tax offsets have all reacted to the change in mortality assumptions. The final result represents the gross life catastrophe underwriting component before diversification in Life Risk.

Important Notes

• Stress-ledger evidence gate: Stressed basic own funds must be backed by a full balance-sheet revaluation flag and model-run evidence flag. The capital result remains the visible loss in basic own funds, while the governance-breach output flags unsupported stress inputs for review. Use `underwriting-stressed-bof-loss-bridge` when the valuation delta needs to be inspected as its own atomistic calculator.
• Absolute vs. Relative Shock: Unlike the 15% mortality shock (relative), the catastrophe shock is an absolute add-on (0.15%). This ensures a meaningful capital charge even for segments with very low base mortality (e.g., young policyholders).
• Localized Exclusions: Policies where the insurer is not exposed to a mortality increase (e.g., annuities) are excluded from the shock. The catastrophe sub-module primarily targets death-benefit concentrations.^[1]
• Gross vs. Net SCR: This calculator determines the standalone Life Catastrophe Risk SCR on the visible stressed basis. Even where the page already reflects direct own-funds or tax effects, Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in Life Risk, then within BSCR, and after the top-level LAC TP and LAC DT adjustments.
• Regulatory deviation: Material deviation from standard-formula assumptions at this layer may support a capital add-on or a move toward an internal model where justified.^[3]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[4]