Q&A

Question

In the following case, is our interpretation correct?

If the largest fire risk concentration located within a radius of 200 meters is a set of 2.000 housing of sum insured  €55.000 average (total sum insured €110.000.000) but the PML = €6.600.000 and EML 8% of PML, according the expert report.

Can we determine that the capital requirement for fire risk, without deduction of the amounts  recoverables from reinsurance,  is €6.600.000?

EIOPA answer

As set out in Article 132 Par. 1 of the Delegated Regulation “The capital requirement for fire risk shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to the sum insured by the insurance or reinsurance undertaking with respect to the largest fire risk concentration”



Par. 2 clarifies that “The largest fire risk concentration of an insurance or reinsurance undertaking is the set of buildings with the largest sum insured that meets all of the following conditions: …(b) all buildings are partly or fully located within a radius of 200 meters”



On this basis the capital requirement for fire risk before taking into account any effects of reinsurance or other risk-mitigation techniques that meet the requirements set out in Articles 208 to 215 of the Delegated Regulation would be €110.000.000