Property Risk

Overview

This calculator implements the gross capital requirement for the Property Risk sub-module within the Solvency II Market Risk standard formula. The Property 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 real estate values.^[1]

Input Terms

• Total Property Exposure: The aggregate market value of all assets sensitive to real estate price fluctuations. This includes directly owned land and buildings (commercial, residential, and own-use), and indirect exposures via collective investment undertakings (like real estate funds).

Technical Rationale

The Property Risk gross capital requirement is calibrated to a 99.5% confidence level over a one-year horizon. Under the Standard Formula, this is modeled as an instantaneous 25% decrease in the market value of all property investments.

Important Notes

• Look-Through Approach: Per Article 84 of the Delegated Regulation, insurers must "look through" investment funds to the underlying real estate assets to ensure all property exposure is captured.^[2]
• Gross vs. Net SCR: This calculator determines the Gross Property SCR, representing the direct 25% devaluation of real estate assets. While Solvency II defines risk as the net impact on Basic Own Funds, that result is only finalized at the Aggregation Layer, where this gross shock is diversified against other risks and adjusted for the LAC TP and LACDT.
• 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.^[3]
• Reporting: The displayed result is intended to support the corresponding standard-formula component feeding the S.25.01 standard-formula reporting view.^[4]