Europe’s 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 analysis:

I wasn’t sure how you get a diversification benefit from a single catastrophe. Turns out we’re not looking at one catastrophe here:

But it's still a lot of euros.

The graph shows the 1-in-200 loss for each country. The sum of all of the losses is €52.5B. However, it is extremely unlikely that each country would incur its 1-in-200 loss in the same year. Hence, the diversification benefit of €15.8B.

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