A3.10.2 Insurance concentration risk component

(1) The insurance concentration risk component for an insurer is:
MER + CoR (if any) − RP (if any)
where:

MER has the meaning given in rule A3.10.3.

CoR or cost of reinstatement, in relation to an extreme event, means:
(a) the rate that an insurer has, under contract, agreed to pay the reinsurer concerned to reinstate the reinsurance cover relating to the extreme event; or
(b) if the insurer has not agreed on the rate for the reinsurance cover — the insurer's estimate of the cost of reinstating that cover based on current reinsurance market conditions (but no less than the original rate of reinsurance cover).
RP or reinstatement premiums, for an insurer that also writes reinsurance, means the amount of inward reinstatement premiums from cedants in respect of catastrophe reinsurance cover if the insurer has a binding netting arrangement with the cedant.
(2) An insurer must seek advice from its approved actuary about estimating its MER if the insurer:
(a) issues policies that do not have a maximum amount insured;
(b) insures risks in multiple lines of business; or
(c) has a complex portfolio of insurance risks.
Amended by QFCRA RM/2015-1 (as from 1st July 2015).