Life catastrophe risk (mortality shock)
The risk that a single event, a pandemic or a disaster, sharply raises a portfolio's mortality in the same year, measured under Solvency II by a fixed shock.
Ordinary mortality risk can be diversified: deaths in a large portfolio are independent and their number is well predicted. A pandemic or a mass disaster breaks that independence, and hits at the same time every death contract, every group protection scheme and the reinsurance behind them. Solvency II measures it with a lump-sum shock, an instantaneous rise in mortality rates applied to the coming year, which sets a capital charge independent of the insurer's own model. For a mixed insurer, the shock works the opposite way on annuities, which makes the offset between death and longevity real but partial, since the insured populations differ.
Article 143 of Delegated Regulation (EU) 2015/35 sets the shock at a 0.15 percentage point rise in mortality rates over the following twelve months; in 2020, France recorded about 669,000 deaths, 9% more than in 2019 according to INSEE, a real excess mortality spread over the whole year and concentrated among the oldest.
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