Comparative Study on non-life underwriting risk in internal models

EIOPA conducts comparative studies to evaluate the performance of different aspects of the insurance and pension sectors in the European Economic Area. Comparative studies focus on specific areas of interest such as the calculation of specific Solvency Capital Requirements (SCR) in internal models.

Non-life underwriting risk contributes significantly to the SCR of insurance undertakings and is of material importance for the majority of internal model undertakings. Consequently, the EIOPA Board of Supervisors decided to perform a European-wide comparative study on non-life underwriting risk in internal models at the beginning of 2020 presenting the second study of its kind. The exercise was conducted by a joint project group of members from National Competent Authorities (NCAs) and EIOPA.

As the study remains independent from the underlying methodologies employed by the internal models, it has the capacity to investigate and compare the modelled risk profile as fairly as possible. This enables comprehensive analysis of the business development, facilitating the identification of peer group behaviour and dominant factors through a detailed risk profile decomposition.

This report summarises the key findings from the NLCS, which covers the first half decade of non-life underwriting risk internal models from year-end 2016 to 2020. Furthermore, it provides an insight into the supervisory initiatives being taken following the conclusions of this study.