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:
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.