Non-Life Risk

Overview

This calculator implements the diversified capital requirement for the Non-Life Underwriting Risk module within the Solvency II standard formula.^[1] The Non-Life Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from a 1-in-200 year stress event affecting non-life insurance obligations, including premium, reserve, lapse, and catastrophe scenarios.^[2]

Input Terms

• Premium & Reserve Risk: The capital requirement for the volatility of unexpected claims emergence and reserving uncertainty across the business lines.^[3]
• Lapse Risk: The capital requirement for the adverse change in the rate of policy lapses or mass termination events.^[4]
• Non-Life Catastrophe Risk: The capital requirement for extreme tail events, including natural catastrophes (e.g., windstorm, flood) and man-made disasters.^[5]

Technical Rationale

The Non-Life Underwriting Risk module follows a 99.5% confidence level over a one-year horizon. Each sub-module measures the instantaneous change in net asset value following the application of the regulatory stress. The standard formula then aggregates these sub-module requirements using the correlation matrix defined in Article 114 of the Delegated Regulation.^[1]

This structure accounts for the diversification between high-frequency, low-severity events (premium and reserve risk) and low-frequency, high-severity events (catastrophe risk). The final result represents the diversified non-life underwriting component feeding into the Basic SCR (BSCR), ensuring that capital is held for the overall portfolio sensitivity to non-life shocks after all naturally offsetting positions have been recognized.

Important Notes

• Catastrophe Diversification: Unlike Health Catastrophe Risk, non-life catastrophes are diversified at the sub-module layer before being aggregated into the final non-life total.^[1]
• Lapse Binding Scenario: Lapse risk is calculated as the maximum loss across several scenarios (up, down, and mass-lapse). The binding direction is policy-specific and depends on the underlying contract economics in a lapse situation.^[4]
• 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.^[6]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01.01 standard-formula reporting view.^[7]