Standard deviation for non-life premium and reserve risk

The standard deviation for non-life premium and reserve risk shall be equal to the following:

sigma nl = 1/V nl * sqrt (sum s,t CorrS (s,t) * sigma s * V s * sigma t * V t)

where:

(a) V nl denotes the volume measure for non-life premium and reserve risk;

(b) the sum covers all possible combinations (s,t) of the segments set out in Annex II;

(c) CorrS (s,t) denotes the correlation parameter for non-life premium and reserve risk for segment s and segment t set out in Annex IV;

(d) σ s and σ t denote standard deviations for non-life premium and reserve risk of segments s and t respectively;

(e) V s and V t denote volume measures for premium and reserve risk of segments s and t, referred to in Article 116, respectively.

2. For all segments set out in Annex II, the standard deviation for non-life premium and reserve risk of a particular segment s shall be equal to the following:

sigma s = (sigma^2 (prem,s) * V^2 (prem,s) + sigma (prem,s) * V (prem,s) * sigma (res,s) * V (res,s) + sigma^2 res,s * V^2 (res,s))/(V (prem,s) + V (res,s))

where:

(a) σ (prem,s) denotes the standard deviation for non-life premium risk of segment s determined in accordance with paragraph 3;

(b) σ (res,s) denotes the standard deviation for non-life reserve risk of segment s as set out in Annex II;

(c) V (prem,s) denotes the volume measure for premium risk of segment s referred to in Article 116;

(d) V (res,s) denotes the volume measure for reserve risk of segment s referred to in Article 116.

3. For all segments set out in Annex II, the standard deviation for non-life premium risk of a particular segment shall be equal to the product of the standard deviation for non-life gross premium risk of the segment set out in Annex II and the adjustment factor for non-proportional reinsurance. For segments 1, 4 and 5 set out in Annex II the adjustment factor for non-proportional reinsurance shall be equal to 80 %. For all other segments set out in Annex the adjustment factor for non-proportional reinsurance shall be equal to 100 %.