Non-Life Aviation Aircraft SI

Overview

Article 131 uses the aircraft-specific sum insured as the exposure measure for the Non-Life Aviation Risk sub-module.^[1] The regulation defines aviation catastrophe exposure at aircraft level because the prescribed stress is a severe single-aircraft event rather than a broad portfolio average.

This calculation prepares one aircraft amount by combining the aviation hull and aviation liability sums insured that relate to that same aircraft. The result is not the aviation SCR by itself. The Article 131 aviation risk requirement is determined by comparing the aircraft-specific sums insured across the relevant insured aircraft population and using the largest one.^[1]

Input Terms

• Aviation Hull SI: The aircraft-specific sum insured for aviation hull insurance and reinsurance on the Article 131 basis.^[1] Hull means damage to the aircraft itself, such as the airframe, engines, avionics, and installed equipment, rather than injury or third-party liability claims.
• Aviation Liability SI: The aircraft-specific sum insured for aviation liability insurance and reinsurance on the Article 131 basis.^[1] Liability means claims arising from the aircraft's operation or accident, such as passenger injury, death, cargo claims, or damage to other property, rather than damage to the aircraft itself.
• Aviation Risk Recognized Reinsurance Recoverables: Recoverable amounts from reinsurance contracts that are recognized for this aircraft under Article 131.^[1] The amount should relate to claims from this aircraft event and should not include protection that responds only to unrelated losses.
• Aviation Risk Recognized SPV Recoverables: Recoverable amounts from special purpose vehicles that are recognized for this aircraft under Article 131.^[1] The amount should reflect SPV protection that would respond to the aircraft event being measured.
• Aircraft Sum Insured: The combined Article 131 exposure amount for the aircraft, built from the hull and liability insurance and reinsurance amounts that relate to that aircraft.^[1] It represents the complete insured loss exposure for one aircraft before that aircraft is compared with the rest of the aviation portfolio.

Regulatory Basis

Article 131 states that the aviation risk capital requirement is based on the largest aircraft-specific sum insured across the aircraft insured by the undertaking in the relevant Annex I lines of business.^[1] It then defines the aircraft-specific sum insured by reference to aviation hull insurance and reinsurance and aviation liability insurance and reinsurance in relation to that aircraft.

The arithmetic addition of hull and liability is therefore an implementation of the Article 131 definition, not a separate legal formula introduced outside the regulation. Recognized reinsurance and SPV recoverables reduce the measured aircraft amount only when they satisfy the Article 131 response basis. Keeping the components visible helps show that the aircraft amount includes both sides of the prescribed aviation exposure and does not compare hull-only or liability-only values against complete aircraft exposures.

Technical Rationale

Article 131 treats aviation catastrophe risk as a concentration exposure because a single aircraft event can produce both hull and liability losses. Combining those two components at aircraft level keeps the exposure aligned with the event being stressed. It also prevents an understatement that could occur if hull and liability amounts were reviewed separately or if the liability amount for one aircraft were mixed with the hull amount for another aircraft.

The evidence trail matters because the final aviation catastrophe amount depends on the largest aircraft exposure. The hull and liability inputs for each candidate aircraft should therefore be supportable from policy schedules, reinsurance arrangements, and any special purpose vehicle documentation. If either component is omitted or the aircraft population is incomplete, the Article 131 result can understate the required capital.

Important Notes

• Net recoverables: Article 131 allows deductions for amounts recoverable from reinsurance contracts and special purpose vehicles only where those arrangements would pay out for claims related to the aircraft being measured.^[1] Recoverables dependent on unrelated claims should not reduce the aircraft sum insured.
• Insufficient-risk override: If deducting recoverables would make the aviation capital requirement insufficient for the undertaking's aviation risk, Article 131 requires the aircraft sum insured to be calculated without that deduction.^[1]
• Prepared SI basis: If recognized recoverables are left at zero, the hull and liability inputs are treated as already prepared on the Article 131 basis. This standard-formula exposure calculator does not recalculate technical provisions, stressed claims cash flows, or balance-sheet reinsurance recoverables.
• Scope of aircraft: The aviation risk calculation must consider all relevant aircraft insured by the undertaking in the Article 131 lines of business. This aircraft-level calculation does not prove portfolio completeness.
• Gross vs. Net SCR: This calculation prepares an aircraft-level exposure amount, not a standalone SCR. Solvency II risk is only finalized as a net impact on Basic Own Funds after the aviation catastrophe result is aggregated through the non-life underwriting risk chain and after the top-level LAC TP and LAC DT adjustments.