Non-Life Earthquake Risk

Overview

This calculator implements the gross capital requirement for the Earthquake Risk sub-module within the Solvency II Non-Life Underwriting standard formula.^[1] The Earthquake 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 seismic hazard.^[2]

Input Terms

• Earthquake SCR: The capital requirement for earthquake risk in each region after the Article 122 regional and zone mechanics have been calculated.^[1]
• Annex VI Region: The selected region for each earthquake SCR amount. The page deduces the Article 122 regional correlation coefficient from the selected pair of Annex VI regions.^[1]
• Other Regions: The capital requirement for earthquake risk in regions outside the specified regional set.^[1]

Technical Rationale

The Earthquake Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. It captures the sensitivity of the undertaking’s basic own funds to a catastrophic seismic event. The standard formula uses a geographical scenario-based approach, summing the results for each hazard zone after applying the specified diversification rules between zones.^[1]

Article 122 separates earthquake into regional risk amounts because seismic exposure is highly location-dependent, while the standard formula still recognizes that regional loss events can have statistical dependence. The prescribed regional correlation matrix captures that dependence without turning the regional risk amounts into a simple arithmetic sum.^[1]

The other-earthquake component remains visible because the regulation treats specified Annex VI regions and residual earthquake exposure differently. Keeping that boundary explicit makes the calculation an aggregation endpoint rather than a substitute for the zone and regional loss work.

The zone weighted-sum-insured and specified regional loss mechanics remain separate Article 122 evidence before regional SCR aggregation.

Important Notes

• Scenario source discipline: Prepared catastrophe scenario amounts should be traceable to a documented valuation or exposure model. The calculator keeps the form focused on result-driving scenario amounts and leaves evidence review in the methodology file or governance workflow.
• Geographical Concentration: The requirement is highly sensitive to the concentration of property values in high-seismicity mediterranean or southeastern European zones.
• Model boundary: This page is the final aggregation step. It does not calculate sums insured, weighted sums insured, specified regional losses, or the other-regions premium and diversification formula.
• Gross vs. Net SCR: This calculator determines the standalone Non-Life Earthquake Risk SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after diversification in Non-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 for the S.25.01.01 standard-formula reporting view.^[4]