Windstorm risk sub-module

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

SCR windstorm = sqrt ((Sum r,s CorrWS (r,s) * SCR (windstorm,r) * SCR (windstorm,s) + SCR^2 (windstorm,other)))

where:

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

(b) CorrWS (r,s) denotes the correlation coefficient for windstorm risk for region r and region s as set out in Annex V;

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

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

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

(a) the capital requirement for windstorm risk in region r according to scenario A as set out in paragraph 3;

(b) the capital requirement for windstorm risk in region r according to scenario B as set out in paragraph 4.

3. For all regions set out in Annex V the capital requirement for windstorm 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 80 % of the specified windstorm 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 40 % of the specified windstorm loss in region r.

4. For all regions set out in Annex V the capital requirement for windstorm 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 windstorm 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 windstorm loss in region r. 

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

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

where:

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

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

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

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

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

WSI (windstorm,r,i) = W (windstorm,r,i) ·SI (windstorm,r,i)

where:

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

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

 

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

SI (windstorm;r;i) = SI (property;r;i) + SI (onshore-property;r;i)

where:

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

8. The capital requirement for windstorm 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 any of the following insurance or reinsurance obligations:

(a) obligations of lines of business 7 or 19 set out in Annex I that cover windstorm risk and 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 set out in Annex I in relation to onshore property damage by windstorm and 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 (windstorm, other) = 1,75 * (0,5 · DIV windstorm + 0,5) * P windstorm

where:

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

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