Non-Life Hail Risk

Overview

This calculator implements the gross capital requirement for the Hail Risk sub-module within the Solvency II Non-Life Underwriting standard formula.^[1] The Hail Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from an extreme, low-frequency 1-in-200 year hail hazard.^[2]

Input Terms

• Hail SCR: The capital requirement for hail risk in each region after the Article 124 regional scenario and zone mechanics have been calculated.^[1]
• Annex VIII Region: The selected region for each hail SCR amount. The page deduces the Article 124 regional correlation coefficient from the selected pair of Annex VIII regions.^[1]
• Other Regions: The capital requirement for hail risk in regions outside the specified regional set.^[1]

Technical Rationale

The Hail Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. It captures the sensitivity of the undertaking’s basic own funds to a catastrophic hail storm, which can cause significant damage to agriculture, vehicles, and property in localized corridors. The standard formula uses a geographical scenario-based approach, summing the results for each hazard zone after applying the specified diversification rules between zones.^[1]

Article 124 separates hail into regional risk amounts because hail losses are intensely local, but severe storm systems can still create correlated losses across nearby territories. The prescribed regional correlation matrix recognizes that partial dependence while preserving the diversification benefit of geographically separate exposure.^[1]

The other-hail component remains visible because the regulation treats specified Annex VIII regions and residual hail exposure differently. Keeping that boundary explicit makes the calculation an aggregation endpoint rather than a substitute for the regional scenario work.

The regional scenario, zone weighted-sum-insured, and reinsurance sequence mechanics remain separate Article 124 evidence before regional SCR aggregation.

Important Notes

• Scenario source discipline: Prepared catastrophe scenario amounts should be traceable to a documented valuation or exposure model. The calculator keeps the form focused on result-driving scenario amounts and leaves evidence review in the methodology file or governance workflow.
• Micro-Localized Hazard: Hail risk is notably more localized than windstorm or flood, and the standard-formula factors are designed to recognize the extreme severity that can occur in narrow storm corridors.
• Model boundary: This page is the final aggregation step. It does not calculate sums insured, weighted sums insured, specified regional losses, Scenario A, Scenario B, or the other-regions premium and diversification formula.
• Gross vs. Net SCR: This calculator determines the standalone Non-Life Hail 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.^[3]
• Reporting: The displayed result is intended to support the corresponding standard-formula component for the S.25.01.01 standard-formula reporting view.^[4]