Non-Life Flood Risk

Overview

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

Input Terms

• Sum Insured (Gross): The total value of property exposure insured against flood damage in each geographical zone.^[1]
• Specified Geographical Factor: The regulatory factor (e.g., Q_flood) representing the 1-in-200 year flood severity for each designated zone.^[3]
• Weighted Exposure: The combination of sum insured and geographical factors used to derive the local flood charge.

Technical Rationale

The Flood 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 river, coastal, or pluvial flooding 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]

The calculation first multiplies the exposure in each zone by the prescribed flood severity factor. These results are then aggregated using the correlation matrix provided in Annex IX, which recognizes that floods can affect multiple neighboring regions but are unlikely to peak across the entire continent simultaneously. The final result represents the gross flood component before diversification in Natural Catastrophe Risk.

Important Notes

• Scenario evidence gate: Prepared catastrophe scenario amounts must carry source evidence for both scenario inputs. The selected maximum remains visible, while the governance-breach output flags unsupported scenario preparation.
• Surface-Water vs. Riverine Flood: The standard formula provides a aggregated flood factor that typically combines riverine, coastal, and pluvial risks unless a more specific model is justified.
• Gross vs. Net SCR: This calculator determines the standalone Non-Life Flood 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.^[4]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[5]