Non-Life Man-Made Catastrophe Risk

Overview

This calculator implements the diversified capital requirement for Man-made Catastrophe Risk within the Solvency II Non-Life Underwriting standard formula.^[1] The Man-made Catastrophe Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from extreme, low-frequency 1-in-200 year man-made catastrophe events.^[2]

Input Terms

• Fire Catastrophe Risk: The capital requirement for large-scale fire events in buildings or concentrated property areas.^[3]
• Marine Catastrophe Risk: The capital requirement for catastrophic shipping or offshore accidents.^[4]
• Aviation Catastrophe Risk: The capital requirement for large-scale aviation disasters.^[5]
• Motor Vehicle Liability Risk: The capital requirement for large-scale motor accidents (e.g., in tunnels).^[6]
• Liability Catastrophe Risk: The capital requirement for catastrophic liability claims across multiple business lines.^[7]
• Credit & Suretyship Risk: The capital requirement for large-scale defaults in credit and bonding portfolios.^[8]

Technical Rationale

The Man-made Catastrophe Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. Unlike natural hazards, man-made catastrophes capture losses stemming from specific exposure concentrations, such as the largest building, the largest vessel, or the largest set of liability claims.

The individual sub-module results are aggregated using a root-sum-square structure that recognizes diversification between risk types. This approach assumes that while a catastrophic fire and a major credit default can occur in the same year, they are unlikely to be perfectly correlated in a 1-in-200 year tail scenario. The final result represents the diversified man-made catastrophe component before aggregation into the total Non-Life Catastrophe Risk.

Important Notes

• Exposure Concentration: The requirement is highly sensitive to the undertaking's largest single-item exposures (e.g., the largest building insured for fire or the largest vessel for marine).
• Gross vs. Net SCR: This calculator determines the standalone Non-Life Man-Made Catastrophe 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.^[9]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[10]