PINS A3.10.3 Maximum event retention

(1) MER or maximum event retention, in relation to an extreme event, is the maximum amount of loss to which the insurer will be exposed due to an accumulation of exposures, after netting out any potential reinsurance recoveries.


An insurer should at a minimum calculate an MER that relates to an accumulation of exposures to a single extreme event. However, the Regulatory Authority may require an insurer with a complex portfolio of insurance risks to use a whole-of-portfolio estimation approach.
(2) In calculating its MER, an insurer must:
(a) set the amount based on the accumulation of exposures of the insurer to a single extreme event;
(b) assume a return period of 1 in 250 years (or greater), where the return period is the expected average period within which the extreme event will re-occur; and
(c) take into account:
(i) its risk profile and risk tolerance;
(ii) its claims history (using available internal and external data);
(iii) the capital resources available to it;
(iv) its current and future solvency needs;
(v) its reinsurance programme;
(vi) the classes of insurance business underwritten by it; and
(vii) the areas where it conducts business.
(3) If an insurer is exposed to more than 1 extreme event, its MER is the largest of the MERs calculated by the insurer for those events.
(4) Despite anything in this rule, the Regulatory Authority may require the insurer to make adjustments in calculating its MER.
Inserted by QFCRA RM/2013-1 (as from 1st January 2015).