Prudential, in cooperation with a group of geologists from the Agricultural University of Athens – Department of Geology, has developed a specialized Earthquake Catastrophe Risk Model. The specific model is based on four modules that combines geological, financial and actuarial science:
The main advantage of the model is the use of faults in conjunction with the information obtaining the highest level of accuracy in evaluating the necessary figures. The model is not a “black box”, since it employs data that are public available and can be used for the following purposes:
Do you want to find a way to release capital? Do you need a way to decrease Premium and Reserve Risk? If you manage a non-life insurance company, the answer is here and it
is Undertaking Specific Parameters!
The subset of standard parameters that may be replaced by undertaking-specific parameters as set out in Article 104(7) of Directive 2009/138/EC and comprises a number of parameters, e.g. in the non-life premium and reserve risk sub-module, for each segment set out in Annex II of this Regulation: (i) the standard deviation for non-life premium risk referred to in Article 117 (2) (a) of this Regulation e.t.c.
Following the requirements of Solvency II framework, every insurance company should examine its risk profile in reference to Standard Formula of EIOPA and to check where the modified Solvency Capital Requirement as calculated under Article 282(a) exceeds the Solvency Capital Requirement as calculated under 282(b) by 10 percent or more. In that case, if the risk profile of the insurance or reinsurance undertaking deviates significantly from the assumptions underlying the Solvency Capital Requirement within the meaning of Article 37 (1) (a) and (b) of Directive 2009/138/EC, they have to take management actions, like USPs or even partial and full internal models.