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European Insurance and Occupational Pensions Authority
 

3110

Q&A

Question ID: 3110

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: 120-125

Status: Final

Date of submission: 24 Jun 2024

Question

We have a question regarding CDR article 120-125. For each Natural catastrophe risk sub-module we need to calculate a weighted sum (WSI). After it is introduced, we have the following text: Where the amount determined for a particular risk zone in accordance with the first subparagraph exceeds an amount (referred to in this subparagraph as ‘the lower amount’) equal to the sum of the potential losses without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, that the insurance or reinsurance undertaking could suffer for windstorm risk in that risk zone, taking into account the terms and conditions of its specific policies, including any contractual payment limits, the insurance or reinsurance undertaking may, as an alternative calculation, determine the weighted sum insured for windstorm risk in that risk zone as the lower amount. This indicate a minimum should be included: MIN(WSI, "the lower amount"). However, we don't know what the lower amount exactly is. Is it simply SI?

EIOPA answer

As required under Article 120-125, one should take the minimum between WSI and the SI which takes into account the terms and conditions of its specific policies.

In the case where the written policy of the undertaking limits more greatly the sum insured than the average undertaking in case of catastrophic event, the “ex-post adjustment" avoids that the SCR of this specific undertaking becomes unrealistically large.