Europe’s 1-in-200 stress test: a EU36.7B catastrophe

Bloomberg:

European insurers have to be able to manage a regional windstorm that could cause 36.7 billion euros ($51 billion) in insured losses under proposed new risk-based regulation, Perils AG said.

Perils is the official scoreboard for European catastrophes, founded in 2009. It collects loss information about European cats, the major one being winter windstorms. In the U.S., PCS provides a similar service.

Solvency II calls for capital to cover a 1-in-200 storm. Perils estimated one for nine areas: Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Switzerland and the United Kingdom. The results are in the graph below:

 

That’s a lot of euros.

(I’m a little puzzled by the diversification effect in this chart. Usually diversification effects come from insuring different lines of business, so I’m not sure why a major storm would have a diversification effect. Could €36.7B be the capital charge stemming from an insured loss of €52.5B? Stories and the Perils press release aren’t clear. Feel free to clue me in via comments.)

By contrast, Hurricane Katrina is the worst U.S. disaster, with $41 billion in insured losses onshore, another $2 billion or so from offshore oil rigs and another $16 billion from flood insurance, which the federal government provides.

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One thought on “Europe’s 1-in-200 stress test: a EU36.7B catastrophe

  1. […] stress test: an update An update on this item regarding Perils’ development of a 1-in-200 year cat loss as part of Solvency II’s QIS5 […]

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