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Non-Life Geographical Diversification Factor

Non-Life

Calculate the Geographical Diversification Factor instantly.

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Geographical Diversification Factor

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1Step 1

Forced Unity Flag

Forced Unity Flag=nonlife_annexiii_force_to_one⁡(Annex II Segment Number,Uses Undertaking-Specific Parameter (0/1))\textit{Forced Unity Flag} = \operatorname{nonlife\_annexiii\_force\_to\_one}\left(\textit{Annex II Segment Number}, \textit{Uses Undertaking-Specific Parameter (0/1)}\right)
2Step 2

Total Regional Volume Measure

Total Regional Volume Measure=Northern Europe Regional Volume Measure+Western Europe Regional Volume Measure+Eastern Europe Regional Volume Measure+Southern Europe Regional Volume Measure+Central and Western Asia Regional Volume Measure+Eastern Asia Regional Volume Measure+South and South-Eastern Asia Regional Volume Measure+Oceania Regional Volume Measure+Northern Africa Regional Volume Measure+Southern Africa Regional Volume Measure+Northern America ex-US Regional Volume Measure+Caribbean and Central America Regional Volume Measure+Eastern South America Regional Volume Measure+Rest of South America Regional Volume Measure+US North-East Regional Volume Measure+US South-East Regional Volume Measure+US Mid-West Regional Volume Measure+US West Regional Volume Measure\textit{Total Regional Volume Measure} = \textit{Northern Europe Regional Volume Measure} + \textit{Western Europe Regional Volume Measure} + \textit{Eastern Europe Regional Volume Measure} + \textit{Southern Europe Regional Volume Measure} + \textit{Central and Western Asia Regional Volume Measure} + \textit{Eastern Asia Regional Volume Measure} + \textit{South and South-Eastern Asia Regional Volume Measure} + \textit{Oceania Regional Volume Measure} + \textit{Northern Africa Regional Volume Measure} + \textit{Southern Africa Regional Volume Measure} + \textit{Northern America ex-US Regional Volume Measure} + \textit{Caribbean and Central America Regional Volume Measure} + \textit{Eastern South America Regional Volume Measure} + \textit{Rest of South America Regional Volume Measure} + \textit{US North-East Regional Volume Measure} + \textit{US South-East Regional Volume Measure} + \textit{US Mid-West Regional Volume Measure} + \textit{US West Regional Volume Measure}
3Step 3

Geographical Diversification Factor

Geographical Diversification Factor=geographical_diversification_factor⁡(Forced Unity Flag,Northern Europe Regional Volume Measure,Western Europe Regional Volume Measure,Eastern Europe Regional Volume Measure,Southern Europe Regional Volume Measure,Central and Western Asia Regional Volume Measure,Eastern Asia Regional Volume Measure,South and South-Eastern Asia Regional Volume Measure,Oceania Regional Volume Measure,Northern Africa Regional Volume Measure,Southern Africa Regional Volume Measure,Northern America ex-US Regional Volume Measure,Caribbean and Central America Regional Volume Measure,Eastern South America Regional Volume Measure,Rest of South America Regional Volume Measure,US North-East Regional Volume Measure,US South-East Regional Volume Measure,US Mid-West Regional Volume Measure,US West Regional Volume Measure)\textit{Geographical Diversification Factor} = \operatorname{geographical\_diversification\_factor}\left(\textit{Forced Unity Flag}, \textit{Northern Europe Regional Volume Measure}, \textit{Western Europe Regional Volume Measure}, \textit{Eastern Europe Regional Volume Measure}, \textit{Southern Europe Regional Volume Measure}, \textit{Central and Western Asia Regional Volume Measure}, \textit{Eastern Asia Regional Volume Measure}, \textit{South and South-Eastern Asia Regional Volume Measure}, \textit{Oceania Regional Volume Measure}, \textit{Northern Africa Regional Volume Measure}, \textit{Southern Africa Regional Volume Measure}, \textit{Northern America ex-US Regional Volume Measure}, \textit{Caribbean and Central America Regional Volume Measure}, \textit{Eastern South America Regional Volume Measure}, \textit{Rest of South America Regional Volume Measure}, \textit{US North-East Regional Volume Measure}, \textit{US South-East Regional Volume Measure}, \textit{US Mid-West Regional Volume Measure}, \textit{US West Regional Volume Measure}\right)

Understand the Non-Life Geographical Diversification Factor

Overview

This calculator implements the Non-Life Geographical Diversification Factor (GDF) within the Solvency II standard formula.[1] The GDF is defined as a technical adjustment to the non-life volume measure, intended to reflect the risk-mitigating effect of geographic spread across multiple regions or countries.

Input Terms

  • Region-Specific Volume Measures: The earned-premiums and technical-provisions for the undertaking's non-life obligations, segmented by geographic region.[1]
  • GDF Adjustment: The final reduction factor applied to the unadjusted volume measure.

Technical Rationale

The Geographical Diversification Factor is a technical driver intended to credit the undertaking for the diversification of its non-life portfolio across independent geographic markets. It ensures that the capital requirement is not over-calibrated for undertakings with a broad international or regional presence.

The calculation uses a Herfindahl-style index of the undertaking's volume measure across the prescribed geographic regions. This ensures that the undertaking holds enough capital to absorb systemic fluctuations in its base market while recognizing the reduced volatility of a geographically distributed pool of risks.[1] The results feed the Non-Life Premium & Reserve Risk and Non-Life Underwriting Risk modules.

Important Notes

  • Regional Definitions: The geographic regions are strictly defined in Delegated Regulation (EU) 2015/35 (e.g., EEA, North America, Asia).
  • 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.[2]
  • Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01 standard-formula reporting view.[3]

Sources

  1. Delegated Regulation (EU) 2015/35 - Art. 115 (Non-life premium and reserve risk sub-module) - EIOPA
  2. Directive 2009/138/EC - Art. 37 (Capital add-on) - EIOPA
  3. Commission Implementing Regulation (EU) 2015/2450 - QRT S.25.01 - 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.