Question ID: 1302
Regulation Reference: (EU) No 2015/2450 - templates for the submission of information to the supervisory authorities
Article: 35
Template: S.27.01
Status: Final
Date of submission: 16 Nov 2018
Question
1. In case guideline 8 is used for the disaggregation of the gross loss (e.g. in the windstorm module) our understanding is that this disaggregated gross loss is shown as “Catastrophe Risk Charge before risk mitigation” on the QRT S.27.01. Could you please confirm?
2. Disaggregation means that the gross loss is depending on the reinsurance structure. Especially for covers spanning over multiple sub-modules (e.g. man-made and Nat-CAT) should the catastrophe risk charge (for sub-modules below common ancestor) be shown after or before disaggregation? In case the answer is before, where should the diversification (due to disaggregation) be shown which is in any case included in the net result?
3. Could you elaborate more on the application of the scenario-based approach for Nat-CAT in non-EEA regions? Is there a basic principle you are expecting given the granularity of the data?
4. The following is stated in the ITS section on the QRT S.27.01: “Undertakings need to estimate their recoveries from risk mitigation in line with the Directive 2009/138/EC, Delegated Regulation (EU) 2015/35 and any relevant technical standard. Undertakings shall complete the catastrophe reporting template only to the granularity required to perform this calculation.”
We understand that the reinsurance program therefore determines the granularity of the QRT reporting (i.e. defines if sub-module tables need to be populated). Assuming that an entity insures the general natural catastrophe risks and has an aggregate reinsurance covering all perils, our understanding is that the population of the peril specific data tables (e.g. for WS: c0040-10120;r0400-0820) in the QRT S.27.01 would not be required. Can you please advise or confirm?
EIOPA answer
As an overall statement, we need to emphasise that many of these questions relate to complicated Cat-risk-structures (multiple risks over multiple countries) that are very often dealt with in Internal models. It is also acknowledged that EIOPA advised some simplifications to the cat-risk-submodules in the SCR-review, because of its current complexity.
1.Cells {S.27.01.01, windstorm (R0020), SCR before risk mitigation (C0010)} (and {S.27.01.01, R0040 to R0820, C0090}) should present data after disaggregating the gross loss until reinsurance program can be applied.
(Please note that the EIOPA 'Guidelines on application of outwards reinsurance arrangements to the non-life underwriting risk sub-module', guideline 8 'Disaggregating the gross loss to individual countries or other components' concerns allocating the gross loss in order to apply outward reinsurance.)
2.In principle the cat-risk charge should be presented after disaggregation, but because this is a very specific situation, it is advisable to liaise with the local NSA (or in case of a cross border group, the relevant NSA's) to confirm this.
3.This is a very broad-based calculation, as the non-EEA regions are so broadly drawn that the multiples used are no more than an average of a wide range of multiples for different zones within each region.
4.The windstorm by regions section of the standard formula catastrophe template ( {S.27.01, R0040 to R0820, C0040 to C0120} ) should be completed. The general comments part of the instructions set out in S.27.01 fourth paragraph first sentence states "For every type of catastrophe risk the risk mitigating effect of the undertaking's specific reinsurance contracts and special purpose vehicles must be determined". The reinsurance programme determines how the risk mitigating effect is to be calculated. In the case of outward reinsurance covering several perils (including windstorm), the undertaking should determine the capital required for gross of reinsurance windstorm risk for the individual countries and territories in the template and then determine the risk mitigation effect for each country and territory from this outward reinsurance.