Skip to content
Actuably

Non-Life Geographical Diversification Factor

Calculate the Geographical Diversification Factor instantly.

#Annex III RegionRegional Volume Measure
1
€

Raw Regional Factor

100.00%

=

Square-Root Regional Volume

€22 000 000

÷

Total Regional Volume

€22 000 000

Geographical Diversification Factor

100.00%

=

Raw Regional Factor

100.00%

1Step 1

Force the factor to one for mandatory unity segments or undertaking-specific parameters

DIV=1when forcedDIV=1\quad\text{when forced}
2Step 2

Otherwise calculate the Annex III diversification factor from regional volume measures

DIV=∑rVr2∑rVrDIV=\frac{\sqrt{\sum_r V_r^2}}{\sum_r V_r}

Understand the Non-Life Geographical Diversification Factor

Overview

This calculator implements the Non-Life Geographical Diversification Factor within the Solvency II standard formula.[1] The factor is a technical adjustment to the segment volume measure, based on the undertaking's regional volume allocation.

Input Terms

  • Annex II Segment: The non-life segment for which the Article 116 factor is calculated.[1]
  • Annex III Region: The prescribed geographical region used for the Article 116 allocation.[1]
  • Regional Volume Measure: The segment volume amount allocated to the Annex III region.[1]

Technical Rationale

Article 116 gives geographic diversification credit because a non-life portfolio spread across independent prescribed markets should not carry the same premium/reserve volatility as a portfolio concentrated in one region.

The Article 116 geographical diversification factor uses concentration logic because a book spread across prescribed regions should not carry the same premium/reserve volatility as a book concentrated in one market.[1] The factor gives credit for geographic spread while still tying the reduction to the undertaking's own volume distribution.

The factor is applied before Non-Life Premium & Reserve Risk because it adjusts the volume base before premium/reserve capital is formed.

Important Notes

  • Regional Definitions: The geographic regions are strictly defined in Annex III. The annex supplies the regions and formula, while the undertaking's own regional volume split supplies the actual factor.
  • Reporting: The geographical diversification factor supports the volume-measure fields in the S.26.05.01 non-life underwriting risk reporting view; it is not a standalone SCR component.[2]

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 116 (Volume measure for non-life premium and reserve risk) - EIOPA
  2. Commission Implementing Regulation (EU) 2023/894 - QRT S.26.05.01 (SCR non-life underwriting risk) - EUR-Lex

Default values are illustrative sample inputs for navigation, training, and QA. Replace them with controlled data before using the result in capital analysis, governance, or reporting decisions.