Non-Life Liability Risk

Overview

This calculator implements the gross capital requirement for the Liability Catastrophe Risk sub-module within the Solvency II Non-Life Underwriting standard formula.^[1] The Liability 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 liability catastrophe event.^[2]

Input Terms

• Premium Volume (Gross): The total written premium for each liability business line (e.g., General, Product, Professional, Employers' Liability).^[1]
• Specified Grouping Factor: The regulatory factor (e.g., 100% or 160%) representing the 1-in-200 year scenario-specific severity for each liability grouping.

Technical Rationale

The Liability Catastrophe 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 extreme, large-scale liability claims. The standard formula uses a grouping-based scenario approach, where the requirement is the result of several prescribed scenarios, such as the largest single claim or a series of claims from the same event.^[1]

The calculation groups liability lines into five distinct risk groups and applies the prescribed scenarios to each. This ensure that the undertaking holds enough capital to absorb the maximum possible loss from catastrophic professional negligence, product failure, or employer liability. The final result represents the gross liability catastrophe component before diversification in Man-made Catastrophe Risk.

Important Notes

• Scenario evidence gate: Prepared catastrophe scenario amounts must carry source evidence for both scenario inputs. The selected maximum remains visible, while the governance-breach output flags unsupported scenario preparation.
• Scenario Binding Logic: The binding scenario is often the result of the largest single claim exposure multiplied by the grouping factor.
• Gross vs. Net SCR: This calculator determines the standalone Non-Life Liability 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 feeding the S.25.01.01 standard-formula reporting view.^[4]