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European Insurance and Occupational Pensions Authority
 

2574

Q&A

Question ID: 2574

Regulation Reference: (EU) No 2015/35 - supplementing Dir 2009/138/EC - taking up & pursuit of the business of Insurance and Reinsurance (SII)

Topic: Solvency Capital Requirement (SCR)

Article: 132(2)

Status: Final

Date of submission: 08 Feb 2023

Question

Our question is regarding the calculation of the largest fire risk concentration within the fire risk sub-module described in article 132 in the Delegated Regulation (EU) 2015/35.

We are unsure about how to understand the definition of the radius of 200 meters mentioned in article 132 2. (b). “all buildings are partly or fully located within a radius of 200 meters."

Below we have set up 3 examples.

Imagine 3 buildings with the following setup:

•            Building A: TSI of 1000 million €

•            Building B: TSI of 500 million €

•            Building C: TSI of 500 million €

•            All three buildings are square shaped with side length equal to 200

meters.

•            The buildings are placed in such a way, that the centers of the buildings

create a right-angled triangle with the right-angle in building B

•            Distance from the center of Building A to the center of Building B equals

390 meters

•            Distance from the center of Building B to the center of Building C equals

410 meters

•            Distance from the center of Building A to the center of Building C equals

566 meters

 

Example 1:

A circle with radius 200m is placed with its center between the three buildings, resulting in all three building being partly covered by the circle.

Largest fire risk concentration = 1000 + 500 + 500 = 2000 million €

 

Example 2:

A circle with radius 200m is placed with the center of the circle being in the center of the building with the largest TSI, Building A, resulting in only Building A being covered by the circle.

Largest fire risk concentration = 1000 million €

 

Example 3:

Since Building A is large (200m x 200m) the circle in example 2 does not cover a very large area around the building.

If the area is instead interpreted as 200m from the outer walls of Building A, such that every building with a distance (outer wall to outer wall) of less than 200m from Building A is covered, then both Building A and Building B are covered, since the outer wall of Building B is only 190 meters from the outer wall of Building A.

Largest fire risk concentration = 1000 + 500 = 1500 million €

 

Question:

Which of the above examples is correct according to article 132? Should the largest fire risk be 2000 million €, 1000 million € or 1500 million €?

Also, shall the simplification in article 90 c) be interpreted as example 2 or 3?

EIOPA answer

In the situation described, example 1 gives the correct amount.

According to Article 132(2) of Delegated Regulation (EU) 2015/35 (DR), the largest fire risk concentration of an insurance undertaking is the set of buildings with the largest sum insured, after deduction of the amounts from reinsurance contracts and special purpose vehicles, that meets conditions (a) and (b) set out in that provision.

We assume that condition (a) is met. Example 1 meets condition (b) and gives a 200-meter radius circle for which the sum insured is the largest. Therefore this set of building should be used as the largest fire risk concentration.