Non-Life Risk

Overview

This calculator implements the diversified capital requirement for the Non-Life Underwriting Risk module within the Solvency II standard formula.^[1] The Non-Life 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 non-life insurance obligations, including premium, reserve, lapse, and catastrophe scenarios.^[2]

Input Terms

• Premium & Reserve Risk: The capital requirement for the volatility of unexpected claims emergence and reserving uncertainty across the business lines.^[3]
• Lapse Risk: The capital requirement for the adverse change in the rate of policy lapses or mass termination events.^[4]
• Non-Life Catastrophe Risk: The capital requirement for extreme tail events, including natural catastrophes (e.g., windstorm, flood) and man-made disasters.^[5]

Technical Rationale

The Non-Life Underwriting Risk module follows a 99.5% confidence level over a one-year horizon. Each sub-module measures the instantaneous change in net asset value following the application of the regulatory stress. The standard formula then aggregates these sub-module requirements using the correlation matrix defined in Article 114 of the Delegated Regulation.^[1]

Article 114 separates premium/reserve risk from catastrophe risk because ordinary underwriting volatility and low-frequency tail events behave differently.^[1] The diversification structure recognizes that those drivers can offset at portfolio level, while preserving a capital view for the overall non-life underwriting sensitivity before BSCR aggregation.

Important Notes

• Article 113 Scope: The Non-Life underwriting module applies to non-life insurance and reinsurance obligations other than health obligations. Health obligations are handled in the Health underwriting module, and life obligations other than health are handled in the Life underwriting module.^[6]
• Catastrophe Diversification: Unlike Health Catastrophe Risk, non-life catastrophes are diversified at the sub-module layer before being aggregated into the final non-life total.^[1]
• Lapse Binding Scenario: Lapse risk is calculated as the maximum loss across several scenarios (up, down, and mass-lapse). The binding direction is policy-specific and depends on the underlying contract economics in a lapse situation.^[4]
• 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.^[7]
• Reporting: The displayed result is intended to support the corresponding standard-formula component for the S.25.01.01 standard-formula reporting view.^[8]