Non-Life Risk

What this calculator does

This calculator implements the Non-Life Underwriting Risk module within the standard formula. It combines premium and reserve risk, catastrophe risk, and non-life lapse risk into the diversified non-life term used in BSCR^[1][2].

Input terms

• Premium & Reserve Risk: The charge for inadequate pricing or inadequate reserving, built from the standard-formula volume measure and volatility assumptions^[3][4].
• Catastrophe Risk: The charge for low-frequency, high-severity natural and man-made events that are not captured by the ordinary premium-and-reserve volatility approach^[5][6].
• Lapse Risk: The charge for adverse mass discontinuance of the relevant long-duration non-life contracts^[7].

Calculation

Premium and reserve risk uses the standard-formula coefficient-of-variation approach rather than undertaking-specific stochastic modeling, so the charge is driven by the regulatory volume measure and prescribed standard-deviation parameters^[3][4]. Catastrophe risk sits separately because low-frequency tail events do not fit the ordinary premium-and-reserve volatility model, and lapse risk is then added as its own stress before the three components are combined through the non-life aggregation structure^[1][7][5].

Important notes

• The premium-risk volume measure is deliberately conservative.: Capital relief is not meant to arise simply because written premium falls while reserve exposure from prior business remains^[8].
• Natural-cat quantification depends on exposure detail.: Where CRESTA-quality data is unavailable, the simplification route is usually more conservative than the full exposure-based treatment^[8].
• Undertaking-specific parameters may exist: for undertakings that have supervisory approval to replace some industry-wide factors with their own experience-based parameters^[8].
• The non-life result benefits from BSCR diversification: against the wider capital stack, especially where the portfolio sits alongside other materially different risk families^[8][9].
• Reporting: The non-life-risk result is intended to reconcile to the non-life-underwriting part of the Solvency II QRT package, including the S.26 family of views^[10].