Earthquake loss and Solvency Capital Requirement calculation using a fault-specific catastrophe model

Georgios Deligiannakis (), Alexandros Zimbidis and Ioannis Papanikolaou
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Georgios Deligiannakis: Agricultural University of Athens
Alexandros Zimbidis: Athens University of Economics and Business
Ioannis Papanikolaou: Agricultural University of Athens

The Geneva Papers on Risk and Insurance - Issues and Practice, 2023, vol. 48, issue 4, No 4, 846 pages

Abstract: Abstract As of January 2016, the Solvency II Directive demands that all insurance companies in the EU perform a Solvency Capital Requirement (SCR) calculation. We propose an earthquake catastrophe model that calculates the SCR using an innovative hazard module. We test our model in the Attica region, which hosts 41.6% of the insured buildings in Greece. The results show a risk premium of 1.63% up to 3.16% for residential buildings, depending on exposure and deductible policy. A comparison between the EIOPA’s Standard Formula (SF) and our model shows that the SF overestimates the SCR by 19.3% in the Attica region. The addition of the 2% deductible to the exposure policies results in a 56.8% lower SCR than when using the SF. The overestimation varies from 2.7% to 133.57% in seven out of 10 catastrophe risk evaluation and standardising target accumulations zones, and by 16.28–32.97% in the three remaining zones.

Keywords: Solvency Capital Requirement; Earthquake catastrophe model; Active faults; Standard Formula (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1057/s41288-021-00259-x

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