Hail risk sub-module

1. The capital requirement for hail risk shall be equal to the following:

SCR hail= sqrt(sum(r,s) CorrHL(r,s) * SCR (hail,r) * SCR (hail,s) + SCR^2 (hail,other))

where: 

(a) the sum includes all possible combinations (r,s) of the regions set out in Annex VIII;

(b) CorrHL(r,s) denotes the correlation coefficient for hail risk for region r and region s as set out in Annex VIII;

(c) SCR (hail,r) and SCR (hail,s) denote the capital requirements for hail risk in regions r and s respectively;

(d) SCR (hail,other) denotes the capital requirement for hail risk in regions other than those set out in Annex XIII.

2. For all regions set out in Annex VIII, the capital requirement for hail risk in a particular region r shall be the larger of the following capital requirements:

(a) the capital requirement for hail risk in region r according to scenario A;

(b) the capital requirement for hail risk in region r according to scenario B.

3. For all regions set out in Annex VIII, the capital requirement for hail risk in a particular region r according to scenario A shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the following sequence of events:

(a) an instantaneous loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to 70 % of the specified hail loss in region r;

(b) a loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to 50 % of the specified hail loss in region r.

4. For all regions set out in Annex VIII, the capital requirement for hail risk in a particular region r according to scenario B shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from the following sequence of events:

(a) an instantaneous loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to 100 % of the specified hail loss in region r;

(b) a loss of an amount that, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, is equal to 20 % of the specified hail loss in region r.

5. For all regions set out in Annex VIII, the specified hail loss in a particular region r shall be equal to the following amount:

L(hair,r) = Q(hail,r) * sqrt(sum(i,j) Corr(hail,r,i,j) * WSI (hail,r,i) * WSI (hail,r,j))

where: 

(a) Q (hail,r) denotes the hail risk factor for region r as set out in Annex VIII;

(b) the sum includes all possible combinations of risk zones (i,j) of region r set out in Annex IX;

(c) Corr(hail,r,i,j) denotes the correlation coefficient for hail risk in risk zones i and j of region r set out in Annex XXV;

(d) WSI(hail,r,i) and WSI(hail,r,j) denote the weighted sums insured for hail risk in risk zones i and j of region r set out in Annex IX.

6. For all regions set out in Annex VIII and all risk zones of those regions set out in Annex IX, the weighted sum insured for hail risk in a particular hail zone i of a particular region r shall be equal to the following:

WSI(hail,r,i) = W (hail,r,i) * SI (hail,r,i)

where:

(a) W (hail,r,i) denotes the risk weight for hail risk in risk zone i of region r set out in Annex X;

(b) SI (hail,r,i) denotes the sum insured for hail risk in hail zone i of region r.

7. For all regions set out in Annex VIII and all hail zones, the sum insured for hail risk in a particular hail zone i of a particular region r shall be equal to the following:

SI (hail,r,i) = SI (property,r,i) + SI (onshore-property,r,i) + 5*SI(motor,r,t)

where:

(a) SI (property,r,i) denotes the sum insured by the insurance or reinsurance undertaking for lines of business 7 and 19 as set out in Annex I in relation to contracts that cover hail risk, where the risk is situated in risk zone i of region r;

(b) SI (onshore-property,r,i) denotes the sum insured by the insurance or reinsurance undertaking for lines of business 6 and 18 as set out in Annex I in relation to contracts that cover onshore property damage by hail, where the risk is situated in risk zone i of region r;

(c) SI (motor,r,i) denotes the sum insured by the insurance or reinsurance undertaking for insurance or reinsurance obligations for lines of business 5 and 17 as set out in Annex I in relation to contracts that cover hail risk, where the risk is situated in risk zone i of region r.

8. The capital requirement for hail risk in regions other than those set out in Annex XIII, shall be equal to the loss in basic own funds of insurance and reinsurance undertakings that would result from an instantaneous loss in relation to each insurance and reinsurance contract that covers one or more of the following insurance or reinsurance obligations:

(a) obligations of lines of business 7 or 19 as set out in Annex I that cover hail risk, where the risk is not situated in one of the regions set out in Annex XIII;

(b) obligations of lines of business 6 or 18 as set out in Annex I in relation to onshore property damage by hail, where the risk is not situated in one of the regions set out in Annex XIII;

(c) obligations of lines of business 5 or 17 as set out in Annex I that cover hail risk, where the risk is not situated in one of the regions set out in Annex XIII.

9. The amount of the instantaneous loss, without deduction of the amounts recoverable from reinsurance contracts and special purpose vehicles, referred to in paragraph 8 shall be equal to the following amount:

L(hail, other) = 0,3*(0,5* DIV hail + 0,5) * P hail

where:

(a) DIV hail is calculated in accordance with Annex III, but based on the premiums in relation to the obligations referred to in points (a), (b) and (c) of paragraph 8 and restricted to the regions 5 to 18 set out in Annex III;

(b) P hail is an estimate of the premiums to be earned by the insurance or reinsurance undertaking for each contract that covers the obligations referred to in points (a), (b) and (c) of paragraph 8 during the following 12 months: for this purpose premiums shall be gross, without deduction of premiums for reinsurance contracts.