Non-Life Natural Catastrophe Risk | Actuably

Windstorm Risk

€

Earthquake Risk

€

Flood Risk

€

Hail Risk

€

Subsidence Risk

€

Peril Gross Sum

€6 430 285

Before catastrophe peril diversification

−

Diversification Benefit

€3 535 756

−55.0% of standalone

Capital relief

=

Natural Catastrophe Risk Capital Requirement

€2 894 529

After diversification

Natural Catastrophe Risk

Step	Impact	Running
Windstorm Risk	1504160.8956491323	1504160.8956491323
Earthquake Risk	1208304.5973594573	2712465.4930085894
Flood Risk	1355322.839769182	4067788.332777771
Hail Risk	1062497.0588194586	5130285.39159723
Subsidence Risk	1300000	6430285.39159723
Peril Gross Sum	6430285.39159723	6430285.39159723
Diversification Benefit	-3535756.0688920687	2894529.3227051613
Natural Catastrophe Risk Capital Requirement	2894529.3227051613	2894529.3227051613

Natural catastrophe peril shares

Module	Share	Amount
Windstorm Risk	23.4%	€1.5M
Flood Risk	21.1%	€1.4M
Subsidence Risk	20.2%	€1.3M
Earthquake Risk	18.8%	€1.2M
Hail Risk	16.5%	€1.1M

Natural catastrophe correlation matrix

1.000.00

Natural catastrophe correlation matrix
	WINDWindstorm Risk	EQEarthquake Risk	FLDFlood Risk	HAILHail Risk	SUBSubsidence Risk
WINDWindstorm Risk	1.00	0.00	0.00	0.00	0.00
EQEarthquake Risk	0.00	1.00	0.00	0.00	0.00
FLDFlood Risk	0.00	0.00	1.00	0.00	0.00
HAILHail Risk	0.00	0.00	0.00	1.00	0.00
SUBSubsidence Risk	0.00	0.00	0.00	0.00	1.00

1Step 1

Natural Catastrophe Risk Capital Requirement

\textit{Natural Catastrophe Risk Capital Requirement} = \sqrt{\textit{Windstorm Risk} \times \textit{Windstorm Risk} + \textit{Earthquake Risk} \times \textit{Earthquake Risk} + \textit{Flood Risk} \times \textit{Flood Risk} + \textit{Hail Risk} \times \textit{Hail Risk} + \textit{Subsidence Risk} \times \textit{Subsidence Risk}}

\textit{Natural Catastrophe Risk Capital Requirement} = \sqrt{\textit{Windstorm Risk} \times \textit{Windstorm Risk} + \textit{Earthquake Risk} \times \textit{Earthquake Risk} + \textit{Flood Risk} \times \textit{Flood Risk} + \textit{Hail Risk} \times \textit{Hail Risk} + \textit{Subsidence Risk} \times \textit{Subsidence Risk}}

\begin{aligned}\textit{Natural Catastrophe Risk Capital Requirement} &= \sqrt{\textit{Windstorm Risk} \times \textit{Windstorm Risk} + \textit{Earthquake Risk} \times \textit{Earthquake Risk} + \textit{Flood Risk} \times \textit{Flood Risk} + \textit{Hail Risk} \times \textit{Hail Risk} + \textit{Subsidence Risk} \times \textit{Subsidence Risk}}\end{aligned}

2Step 2

Diversification Benefit

\textit{Diversification Benefit} = \textit{Peril Gross Sum} - \textit{Natural Catastrophe Risk Capital Requirement}

3Step 3

Top Peril Ratio

\textit{Top Peril Ratio} = \begin{cases}0 & \textit{Peril Gross Sum} \le 0 \\ 100 \times \frac{\max(\textit{Windstorm Risk}, \textit{Earthquake Risk}, \textit{Flood Risk}, \textit{Hail Risk}, \textit{Subsidence Risk})}{\textit{Peril Gross Sum}} & \textit{Peril Gross Sum} > 0\end{cases}

\textit{Top Peril Ratio} = \begin{cases}0 & \textit{Peril Gross Sum} \le 0 \\ 100 \times \frac{\max(\textit{Windstorm Risk}, \textit{Earthquake Risk}, \textit{Flood Risk}, \textit{Hail Risk}, \textit{Subsidence Risk})}{\textit{Peril Gross Sum}} & \textit{Peril Gross Sum} > 0\end{cases}

Understand the Non-Life Natural Catastrophe Risk

Overview

This calculator implements the diversified capital requirement for Natural Catastrophe Risk within the Solvency II Non-Life Underwriting standard formula.^[1] The Natural Catastrophe Risk requirement is defined as the economic capital necessary to cover the loss in basic own funds resulting from extreme, low-frequency 1-in-200 year natural hazards.^[2]

Input Terms

Windstorm Risk: The capital requirement for wind-driven natural disasters.^[3]
Earthquake Risk: The capital requirement for seismic activity.^[4]
Flood Risk: The capital requirement for river, coastal, or pluvial flooding.^[5]
Hail Risk: The capital requirement for ice-driven atmospheric events.^[6]
Subsidence Risk: The capital requirement for ground-movement hazards.^[7]

Technical Rationale

The Natural Catastrophe Risk sub-module is calibrated to a 99.5% confidence level over a one-year horizon. Each underlying hazard captures the sensitivity of the undertaking’s basic own funds to a specific localized disaster. The standard formula uses a scenario-based approach, where the requirement is the instantaneous loss in NAV under each prescribed hazard scenario.

Article 120 keeps natural catastrophe hazards separate before aggregation because windstorm, earthquake, flood, hail, and other natural events have different physical drivers and territorial patterns.^[1] The root-sum-square structure recognizes limited diversification: multiple natural disasters can occur within the same year, but they are not assumed to reach their 1-in-200 year peak intensity simultaneously across the entire portfolio.

Important Notes

Embedded Diversification: The diversification between different hazards (e.g., windstorm and earthquake) is already recognized within the aggregation structure of this module.
Gross vs. Net SCR: This calculator determines the standalone Non-Life Natural Catastrophe 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.^[8]
Reporting: The displayed result is intended to support the corresponding standard-formula component for the S.25.01.01 standard-formula reporting view.^[9]

Sources